Guaranteed for renters – a home fit to live in

The government aims to ensure a decent home for renters is guaranteed as part of the new Homes (Fitness for Human Habitation) Act. A Private Members’ Bill allowing tenants to sue over the condition of their rental properties completed its paslawsage through Parliament just before Christmas and will become law on 21 March.

The new Act makes changes to the Landlord and Tenant Act 1985, and the Building Act 1984. So what does it mean? Well, from the date the new Act comes into force, all landlords in the social and private sectors must ensure that their property is fit for human habitation at the beginning of the tenancy and stays that way – essentially  guaranteeing that their rented home is fit for purpose. Where this is not the case, tenants will have the right to take legal action for breach of contract on the grounds that the property is unfit to live in. The new Act only applies to tenancies in England. The Welsh Government has already included similar rights for tenants in the Renting Homes (Wales) Act 2016.

The Residential Landlords Association and National Association of Landlords are backing the changes set out in the new Act but some individual landlords are not so keen. They are worried that the new law could mean tenants refusing to pay rent until the freeholder carries out repairs, etc. leading to landlords getting caught up in costly litigation while rogue tenants are given free rein to cause damage.

A simple way to get around this issue is to carry out regular inspections and ensure tenants sign these off every time. Any damage caused can then be noted and a paper trail created that can be used by both sides to prove that what should have been actioned has been done and the tenant charged for repairs where appropriate.

In fact, where not carrying out repairs counts as a breach of contract, tenants have had the right to take their landlord to court since 2015 under the Consumer Rights Act, so that hasn’t really changed. What is new though, is that what defines  ‘fit for habitation’ is now enshrined in law over and above the existing ‘hazards’ that are listed in the Housing Health and Safety Rating System. This is already used by local authorities to ensure that rented housing is of an acceptable level. At the end of the day responsible landlords have nothing to fear from the new Act – after all, any property that is let should automatically be guaranteed to be of an acceptable standard.

As part of a bigger package of reforms that tackles housing problems, the government has also announced  a new Housing Complaint Resolution Service. This guarantees protection for homeowners as well as tenants and gives them a single point of contact to sort out disputes over repairs and maintenance. All private landlords must sign up to the new scheme. If they don’t they could face fines of up to to £5,000. A new Home Ombudsman is also on the cards, so watch this space. All good news for renters and flat owners we think.

How to get better returns from your investment – go north!

blog 5

Are you looking for better returns on your rental investment property? As I wrote in this blog in December, the UK’s 2.5 million private landlords are coming under the cosh from a seemingly never ending host of extra taxes and new regulations. This is a trend that shows no sign of letting up in 2019. So getting good yields on their rental property is becoming ever-more important for buy-to-let investors who are having to think on their feet. And many are now heading north for better returns.

Property firm Your Move reported this month that the North East and North West are particularly attractive markets now because a combination of low house prices and large student populations in many areas mean good yields and fewer void periods for landlords. According to their rental tracker, the average investor in the North East enjoyed a rental return of 5% in the year to November 2018 while in the North West, returns were only slightly lower at 4.8%.

Landlords can get better returns in the north of England
Landlords are looking north for better returns

With landlords keen to buy and good transport links and job prospects attracting more people to the region, both housing transactions and rental demand are going up – while interest in the London market gently slows down.“Properties in the North appear to offer high percentage returns to property investors and, as a result, they are attracting interest even more,” Martyn Alderton, national lettings director at Your Move said. However, with massive interest now being shown in cities like Manchester and Liverpool from large-scale build-to-rent (BTR) operators, BTL landlords can’t afford to rest on their laurels.

In Manchester the city centre has seen an 8% increase in supply, leading to those inevitable questions about the possibility of the market overheating. Ringley now has a strong presence in the Manchester market, working with landlords, developers and investors in the city thanks to our 2018 joint venture with local property manager and lettings agent JP Hay.

We are now managing both BTR property and more traditional BTL rentals in the north of England, so our advice to BTL landlords is to ensure that your rental property is well-maintained, well-equipped and exactly matches the description that you or your agent is advertising .

There is certainly plenty of demand out there – but there is also a plentiful supply of new builds so competitition is fierce. But not everyone wants to live in a modern BTR apartment block – so if your rental property is older, is a house rather than a modern flat, or is located in the suburbs, it still has as much chance of appealing to a tenant as a brand new purpose-designed city centre studio or duplex – as long as it is well-presented and offered at the right price and you ensure that you fulfil your obligations as a responsible landlord.

As Your Move rightly said last week, landlords who are prepared to invest in their property will undoubtedly benefit from higher yields and better occupancy rates.

 

Forget the Beast from the East – get ready for the Polar Vortex!

stormThe Beast from the East is so last year. Instead, for 2019 we have the Polar Vortex! This sounds absolutely terrifying but in fact it is just another spell of very cold weather which is predicted to hit us in a week or two. For landlords, this is the time of year when tenants are most likely to start complaining about faulty boilers and central heating systems. And if you’re not vigilant, you could even find yourself facing insurance claims for leaking roofs and damage caused by blocked gutters.

So before you do anything else, check that your landlord insurance is up-to-date and that you have enough cover. Then, should the worse happen, at least you can be sure that any claims will be dealt with as quickly and efficiently as possible.

One of the most common boiler-related problems in winter is frozen pipes. According to Direct Line, there has been an increase in insurance claims for faulty boilers in recent years and with temperatures expected to plummet towards the end of the month, insurers are predicting the record for boiler claims could be broken again this winter.

Here are a few quick and simple tips. Ensure you have the boilers in your properties serviced regularly; bleed the radiators on a regular basis to keep the system working efficiently and ask tenants to keep the heating on low in very cold weather to help prevent external condensate pipes from freezing. Insulating the pipe also helps. If you have properties standing empty, unless the water system has been drained and utilities switched off, it is worth keeping the heating ticking over at a low level to prevent frozen or burst pipes. If you have a maintenance contract in place, your contractor should cover all these issues but it’s still worth talking to them to make sure this is the case. We can help you find maintenance suppliers if you don’t have a service contract and feel you would benefit from one.

Roofs and guttering are also very susceptible to damage in winter storms and a little preventative maintenance goes a long way. Look out for broken tiles, any issues with pointing and rendering, and cracks in chimney stacks. Any of these problems should be tackled straight away. Every time we experience heavy rain, strong winds or snow, landlords who haven’t bothered to keep on top of maintenance at their properties end up having to deal with costly leaks and damaged roofs which can also lead to the need for extensive – and expensive – internal and external repairs, to say nothing of angry tenants.

And don’t forget the guttering. Faulty, blocked or broken guttering will not direct water away from the external walls of your property and, again, can cause hundreds or even thousands of pounds worth of damage. So do make sure that gutters are checked regularly to ensure they are free of leaves, moss and other debris, and that any missing guttering and end caps are replaced.

Also, don’t forget to talk to your tenants. Make sure they know how to find the stopcock in case they need to turn off the water supply if there’s a leak and know how to contact their property manager in an emergency.

And finally – talk to us. If you need any help with winter maintenance issues, we are only ever a phone call away.

Right to rent: unfair to landlords and tenants?

passportShould landlords be expected to act as border control officials when renting to a new tenant? This is the question that a Judicial Review of the government’s controversial Right to Rent policy, which obliges landlords to undertake immigration checks on prospective tenants, will be asking as it gets underway today.

The Right to Rent scheme was rolled out nationwide in 2016, meaning that landlords must now check the immigration status of would-be tenants. Understandably, this initiative has proved really unpopular. Landlords are already under pressure from government (see my blog Landlords under fire, posted on 11 December) and certainly don’t want to take on responsibility for ensuring that tenants have a legitimate right to rent a home.

When the scheme came into effect, the Joint Council for the Welfare of Immigrants (JCWI) thought it was so potentially discriminatory that it put forward – and won – a legal challenge, gaining the right to launch a High Court case against the Home Office. As I write this blog, a full hearing is taking place before the High Court today and tomorrow.

The JCWI’s legal challenge is being supported by the Residential Landlords Association (RLA) which has carried out research among landlords to find out how they feel about the scheme. The RLA found that, as a result of the Right to Rent policy, 44%  are now less likely to rent to someone without a British passport , mainly because they are scared they may be prosecuted if they get something wrong. Landlords also say that, as a result of Brexit and the continuing uncertainty around the future status of EU nationals in Britain, they are now less likely to rent property to anyone from the EU or the European Economic Area.

According to Landlord Today, the RLA is calling for Right to Rent to be scrapped, arguing that it discriminates against those unable to easily prove their identity and foreign-born nationals who have documents unfamiliar to landlords. It is also calling for urgent guidance for landlords to be issued by the government, explaining clearly the rights of EU citizens to rent property, especially in the case of a no-deal Brexit.

The whole situation is reminiscent of the Windrush scandal that came to light earlier this year. Landlords are not government officials and shouldn’t be expected to act on behalf of the Home Office or to make a judgement call around who is and isn’t legally entitled to rent a property. Landlords are under enough pressure from excessive taxation and a new raft of regulations without being expected to act as immigration officers too.

Brexit: what’s the impact on property?

BrexitHarold Wilson, who delivered the UK’s first European referendum in 1975, said a week is a long time in politics. This week, Brexit has been the only story in town.

In October, Zoopla reported that the impact of Brexit “…has been limited so far”. Housing fundamentals such as affordability, tax changes and mortgage regulation were thought to be the main factors of the slowdown in London – where average prices are falling by 0.4% –  and the Brexit vote has been a compounding factor, said the online property portal.

However, continuing uncertainty created by the Brexit process is now starting to take its toll. According to the latest RICS Residential Market Survey, this is causing both buyers and sellers to sit tight in increasing numbers.

The results from the latest survey show a weaker trend in sales than in previous months, with the headline indicators for demand and supply falling once again. Almost half of the agents responding to the survey blame the political uncertainty around Brexit for people’s reluctance to either put their home on the market or take out a new mortgage.

The lack of new stock coming onto the market means that agents are reporting only having, on average, 42.1 homes for sale and the number of valuations is also down in comparison to this time last year. With little choice for new buyers and fewer people interested in moving, the number of agreed sales fell in November.

Caution is now clearly visible among both buyers and sellers, says RICS chief economist Simon Rubinsohn, and where deals are being done, they are taking longer to complete. The worry now is that this uncertainty may spill over into the development pipeline, making it even harder to secure the uplift in construction that is so badly needed to address the housing crisis.

So much for the big picture, but what about the story closer to home? Fewer than 20 weeks are left to arrange the UK’s departure from the EU and businesses around the country are having to consider what they may need to do after 29 March next year.

According to a new report aimed at British business from lawyers CMS, Ready for Brexit?, only 22% of large businesses are well prepared. Another 11% expect to prepare but haven’t started yet and just 59% of small businesses expect to make any preparations for a chaotic exit from the EU.

It is easy to assume that Brexit will have little impact on the way letting and managing agents run their businesses. After all, we have nothing to import or export. The regulations we adhere to may change but that won’t happen overnight. However, Brexit may well impact the people we employ. There has been a lot of talk around recruiting British workers after Brexit.  At Ringley we have a proactive recruitment and training policy and are an Ambassador for Apprenticeships. We are passionate about training staff in-house and, regardless of the way Brexit pans out, we will continue to recruit staff who fit our company culture and develop our people in order to deliver the very best service to our clients.

Manchester in the spotlight

blog 3New research from commercial agents Cushman & Wakefield revealed last week that the Manchester property market really is the place to invest for buy-to-let landlords and institutional investors alike.

Second only to London, Greater Manchester has a dynamic, rapidly expanding economy which continues to attract both large and small businesses to the area. In turn, this is bringing talent into the region, with people looking to relocate for work and creating ongoing demand in both the housing and private rental markets. The booming economy is certainly turning Manchester into a buy-to-let hotspot and, according to one local estate agent, the city offers some of the most attractive yields and rental returns in the country, outperforming all other core UK cities when comparing house price inflation. London and Leeds ranked poorly compared to the 9% rise in Manchester.

If you’re looking to invest, Cushman & Wakefield says properties in the M14 postcode can be expected to deliver yields of 10%, with current asking prices averaging at £194,733 and rental prices averaging at £1,636 per month. The M19 postcode – which includes Levenshulme, Burnage, Heaton Mersey, Heaton Chapel and Reddish – and M20 area also came out well in their report, showing yields of up to 8.6%.

Manchester uniThe other success story for the buy-to-let market is the student factor. Landlords in Manchester really benefit from the substantial student population which is attracted to the city by its four highly sought-after universities. Properties located near to any of the universities are in high demand, creating a very dependable local student market. As noted above, Fallowfield in M14 has such high yields because it is heavily populated by students, meaning that you can buy a house and rent it out per person per month.

All these factors also add up to make the city a build-to-rent hotspot. The British Property Foundation said recently that BTR development in the regions is now out-performing London and Manchester is really pulling out ahead.  More than 11, 000 residential units are currently under construction in the city centre, with BTR dominating the market. At Ringley we have joined forces with Manchester-based JP Hay and we are working together to expand their BTR offer in the city. Together, we believe we are delivering a winning offer to clients in the region – combining our considerable  block management, proptech and lettings experience. We will also be building on our success in the Manchester market to deliver these services to BTR clients further south.

The future certainly looks bright for Manchester’s property market. The city has been a popular area for property investment for years and according to a recent report in Landlord Today, “Despite punishing tax changes and political uncertainties… Manchester remains as resilient as ever…” Cushman & Wakefield predict  house price growth of up to a staggering 57% in the city by the end of 2028. The agent believes that rising demand combined with the popularity and affordability of new properties will continue to make Manchester a great proposition. So now could be the perfect time to invest.

Landlords under fire

buy to letLandlords could be forgiven for feeling like pariahs just now. The government is working hard to make it really difficult to be a landlord, which seems more than a little out of kilter in a market that needs more, not fewer homes for rent

Ringley is retained by and advising top institutional build to rent developers in England and Ireland and has just announced a joint venture with JP Hay which is very active in the BTR market in Manchester.  With housing need so acute right across the country, supply has to be the answer so the more the better.  Bring it on, we say!

The current thinking around the private rented sector is clearly to foster institutional investment and encourage the big developers to flood the market with purpose-designed build to rent accommodation, while taxing smaller buy-to-let landlords out of the market, in theory leaving the big boys to do it better. But not all renters want to live in an institution-run building and many may prefer a flat in a small development or a house. In light of rising house prices and a rapidly expanding rental sector surely there has to be room for a broad range of property that includes HMOs, family homes and older as well as new build housing stock in addition to the shiny new apartment blocks that are springing up across the country.

The other aspect that we believe needs revisiting is taxation. According to new research from the National Landlords Association, the rental income received by 79% of landlords with mortgages is only sufficient to service the interest element of their loans, and not pay down their debts, as they contend with rising costs. How is it possible to justify taxing buy-to-let landlords differently to institutional landlords – it is clearly unfair.  The government has failed again and again at meeting its own housing targets.  Arguably, only on immigration targets is its track record worse. And the government is equally scared about funding pensions for our aging population.   So, if a buy-to-let landlord is delivering both a home to a tenant and simultaneously providing for their own old age via property investment, instead of expecting government handouts then surely the BTL sector deserves support? Our solution is simple: instead of forcing BTL landlords out of the market, why not limit the number of properties they can own and monitor them properly to keep the rogues out of the market.

The Tenants Bill now going through Parliament is rightly trying to make the market fair and transparent for renters. But there is a balancing act here. For the pendulum to swing too far in the direction of tenants without also addressing the genuine needs of landlords, many may decide to call it quits. That would worsen, not alleviate, our current housing crisis and would be an embarrassing own-goal for government.

As the NLA said this week, encourage building more housing of all tenures by simplifying planning and borrowing rules and stop taxing professional landlords out of the market. The loss of good landlords will not make renting more affordable; it will simply drive up the cost for those who want to access decent rented homes.

Renting for life – what’s the problem?

For-rent-signLetting Agent Today claims that a third of millennials will never own their own home. The report quotes new research from interiors firm Thomas Sanderson showing why the rental market is seeing such strong demand: it reveals that 28% of people under the age of 35 have no money set aside for a deposit on a house. Of the remaining 72%, the average amount people had saved was just over £6000 – that’s under a fifth of the average deposit for a house in the UK. And 30% of Britons aged 18 to 35 years old say they have given up on the idea of owning their own home completely.

What all this adds up to, is that large numbers of us will be living in the rented sector, not only while we are young and single but once we’re married and start a family, into middle-age and beyond. Research from the Resolution Foundation and Shelter predicts that by 2025, 33% of families with children living in London will be renting.

So given that more of us will be renting for longer – or for our whole lives – should we be moving to a regime more like the European model. In Germany for example, tenants have extensive rights including security of tenure, assured rental rates and protection from hardship caused by unfair practices.

These aspects of a highly-regulated rental market are great for tenants but may be viewed less favourably by landlords the majority of whom, understandably, want to be in control of their own property. They want to be able to decide who lives in it and for how long. If tenants prove troublesome they want to be able to evict them.  Conversely, if tenants are happy in their home,  easy to deal with and pay their rent on time, most landlords will let them stay for as long as both parties are happy.

Getting the balance right by ensuring legislation works for both sides of the renting equation is the job of government – but it’s not an easy task. New legislation coming forward aims to tackle some of these issues and stronger regulation around property agency will undoubtedly help too.  Dealing with the fall-out when landlords and tenants clash is part and parcel of our role as property managers. Alongside our technical and professional role as agents we often feel we should win prizes for diplomacy too!

Vidhya Alakeson, director of research at the Resolution Foundation, said recently that families who rent need security in a regulated market. “With children attached to schools and parents to work, it is critical for households – and for society – that families can find stable and secure rented accommodation to raise their children in.” That sounds about right to us. What do you think?

 

Take-aways from the National Residential Investment Conference 2018

Today I have been talking about the rental market at this year’s sold out National Residential Investment Conference, held each year in London.

Among other topics in the spotlight during the course of the day, was JLL’s recent research on the institutional (non-Housing Association) sector.  Here are some key facts and figures. Having analysed seven residential developments comprising 911 units with an average scheme size of 130 homes, JLL reveals that average gross to net is 26.6% with an average rent premium of 9% for high quality build-to-rent developments and 3% rental growth.

The average tenant age across these schemes was 31 years old, achieving circa 30% more than the mean UK salary.  Tenants were prepared to pay to be in a BTR or multi -family scheme and were not over extending themselves with rent to income at 28%, compared to the UK over-burdened rate of 40%.

JLL also identified these net initial yields:

  • London Zones 1-2 suggested yields 3.5%
  • London Zones 3-6 suggested yields 3.75%
  • Regions 4.15 to 5%
  • Glasgow the highest at 5%

Urbanisation remains the trend, with 4bn of world’s 7.5bn now living in cities.

The conference also threw up some interesting statistics on the changing nature of UK households.

The number of people getting married is on a downward trend. In tandem with this, the average number of children per couple is reducing and people continue to start their families later than previous generations.  The knock-on effect of all this, is that two thirds (or 17 million) of UK households do not contain children.

In terms of future property provision, this means that what the UK needs are more homes suited to couples with no children, retirees and single sharers.   As a result, we anticipate that micro-living solutions and co-living will get more air space going forward.

The Collective at Old Oaks is one of the first purpose-built co-living developments in the UK
The Collective at Old Oaks is one of the first purpose-built co-living developments in the UK.

So what is micro-living, I hear you say. Isn’t that just an HMO?  Rightly or wrongly, for most of us HMOs tend to conjure up badly converted, poorly maintained housing stock – not the purpose-built, thoughtfully designed new spaces now coming on line.  The Collective at Old Oak is a good example, although arguably it could be termed student accommodation for grown-ups!

So the answer is surely not more HMOs, but rather well-designed spaces concerned largely with common, outside-the-apartment space.   This puts me in mind of 1930s mansion blocks with their own restaurant and no individual kitchens to speak of.

At Ringley we manage some of these, which – without all the original amenities that have gradually been lost over time – are now often just cramped flats.  I trust in future these shared spaces will be better designed and the ‘outside-the-home’ spaces will be more about living than eating.

Shaking up property disputes – it’s about time

 

law reformIt really is all change in our industry at the moment as yet another consultation is unveiled by government – this time on the idea of setting up a new ‘Housing Court’.

Proposals were outlined yesterday (13 November) by Communities Secretary James Brokenshire that aim to shake up the property dispute system and find better ways of resolving legal issues between landlords and tenants.

The Government wants views and opinions on the:

  • private landlord possession process
  • user experience in both the county courts and the First-tier Tribunal for property cases
  • case for a new Housing Court
  • case for other structural changes such as an extension of the remit of the property tribunal

Other proposals include reducing the need for multiple hearings in different courts, transferring certain types of housing cases between the courts and tribunal to get quicker resolution and providing better guidance for landlords and tenants to help them access the legal system.

At the moment legal disputes that centre on housing are dealt with in a range of different ways, depending on the issue in question. This is confusing and can put people off seeking a solution to their housing problems. Some families and vulnerable tenants live in fear of being forced to move or being evicted if they complain about a housing problem. This isn’t good enough. And the problem isn’t all one-sided. Landlords may also struggle to get their property back even when they have a legitimate reason to do so.

The government hopes the proposals set out in the consultation will help sort out these problems, making it easier for tenants to pursue disputes and helping enforce their rights under the law.  Landlords could also be more confident in offering longer, more secure tenancies where appropriate.

Bodies representing landlords are particularly interested in reforming the current possession process – which can be long drawn out and costly. The National Landlords Association will be asking government in particular to look at the Section 8 possession process. For those of you who aren’t familiar with the ins and outs of landlord and tenant law, Section 8 requires landlords to seek a court order to gain possession of their property where a tenant has breached the terms of their agreement.

At the moment, claims the NLA, it takes about 18 weeks between a landlord making a repossession claim and getting the property back. This can cost more than £5000. The “sticking plaster” alternative to Section 8 is Section 21 which kicks in only after a fixed-term tenancy ends or during a periodic tenancy but no reason is needed for serving a tenant with an eviction notice and tenants must vacate the premises within two months. Most tenancies are ended by the tenant – but in a minority of cases landlords are within their rights to ask a tenant to leave. Reform is long overdue and this consultation may be an opportunity to swing the balance back into the landlord’s favour when a tenant is at fault.

What do you think? The government is looking for views and opinions from both landlords and tenants so to have your say, go to https://bit.ly/2DDmWl3. The consultation runs until 22 January 2019.