Landlords challenged, but by no means down and out

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Buy-to-Let Investment Returns:

This is the conclusion of recent report. The bi-annual “Rent Check” report from BDRC Continental in collaboration with Allsop LLP is a unique measure of the rents being agreed by landlords for Private Rented Sector (PRS) tenancies across England and Wales. This latest research tracks 1,557 landlords in Q3 and Q4 2016 providing a statistically robust overview of the rental market – it covers 11,595 properties.

The figures obtained for the last six months show a marked uncertainty continuing in the rental market as landlords come to terms with the new taxation and other regulatory rules, and although confidence remains “well below the long term trend”, as recorded by previous Rent Check reports going back to Spring 2013, the Spring 2017 report still projects an optimistic message for the future, showing that despite the obstacles, landlords’ investments returns from buy-to-let are projected at well above alternative investment opportunities:

“In a housing crisis which is not showing any signs of going away, the role of residential investors and smaller scale landlords has been an issue of growing controversy, contention and debate for much of the last 18 months.

“With an increasingly stringent legislative framework, the requirement for additional compliance checks and a worsened taxation position (both on entry with a surcharge in SDLT on second homes and on income via a reduction in mortgage interest relief), the investment motivations and expectations of residential landlords are being fundamentally challenged at a granular and ideological level,” says the report.

The authors make the distinction between “market value” and “worth” to the individual of a particular investment opportunity, given their own circumstances; chiefly the tax band they are in, but also alternative earnings, and other factors such as shared ownership with a spouse etc.

For those landlords in the basic rate tax bracket, tax relief will continue the same for all their mortgage interest payments, thus ‘worth’ will differ between different investors at each tax level.

For comparison and insight the report provides figures for the general mix of property types in the PRS, according to the English Housing Survey, average property values in each region (calculated against gross yields provided).

So, given that landlords are overcoming their doubts and confidence is still increasing in buy-to-let investment, despite the legislative changes, the report’s estimate of future returns for investors in terms of individual ‘worth’ using BDRC Continental and based on Office for Budgetary Responsibility’s (OBR) forecasts for national wage and house price growth, these returns look highly respectable in comparison to alternatives.

The report concludes that private rented housing still has a crucial part to play in solving the UK’s housing crisis. That the emerging institutional build-to-rent sector is encouraging in terms of new supply, but given the scale is unlikely to be sufficient to provide all the quality housing needed across the whole of the UK.

There will, it seems, still be room, depending on individual circumstances, for the small-scale buy-to-let investor who are selectively looking for a safe investments that offer very respectable total returns over the long-term. Indeed, however much home ownership is desirable, with an increasingly flexible and global economy this is not immediately compatible with fewer properties available for rent.

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Vacant on vacation

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Is your tenant jetting off on an extended summer break this year? The experts at Belvoir reveal their ten-step plan to help protect your property while it’s vacant and vulnerable

Lock up lowdown

Ensure your tenants lock up before they leave…

“It may sound obvious but make sure all door and window locks are adequate and fully functioning,” says co-owner of Belvoir Basingstoke Mike Jones.

“At Belvoir Basingstoke we check these at inventory stage when a tenancy begins, making sure there are a sufficient supply of window locks and that they are all working.

“A tenant should have copies of all necessary keys and should be made aware that they are expected to use them.”

Securely stored

Don’t leave it on display… put it away!

“Ensure the tenant knows not to leave valuables on display by doors or windows,” says co-owner of Belvoir Bedford Zoe Bywater. “Small items, which are clearly visible and can be removed easily, may prove tempting to opportunistic thieves.

“It’s advisable that all valuable items should be put away securely where they are hidden from view.”

Night lights

Keep it light and bright… dark corners and shadowy spots are welcomed by would-be intruders.

“A number of the rental properties we deal with have external security lights with motion sensors,” says Mike. “Not only are these a great deterrent for potential burglars, but they are also beneficial for your tenant’s personal security, especially if the property has a dark porch or is situated in an unlit alley.”

Good neighbours

Get a little neighbourly help…

“If you have a good relationship with the neighbours then they can be extremely helpful in creating the illusion that the property is occupied,” says Zoe.

“From opening and closing the curtains and switching lights on and off again, to moving post gathering behind the front door and bringing in the bins, a good neighbour’s help can be invaluable.

“Additionally, if there’s a local Neighbourhood Watch scheme you may wish to register, plus you may want to give the neighbours your contact details and ask them to get in touch if they notice any problems.”

The great outdoors

It’s not just what’s on the inside that counts…

“During an extended empty period for your property it’s also important to protect garages, sheds and outbuildings,” says Mike. “These can house expensive items, such as lawnmowers and other garden equipment, and are often seen as an easier target than the main property itself.

“Make sure a good quality lock is provided for any outbuildings, plus perhaps supply a lock for back gates in order to make entry to the garden more difficult.

“Talk to your tenant about what’s being left on display too and consider covering the windows, perhaps with some hardboard, to reduce visibility… and temptation.”

And, don’t give would-be thieves a helping hand. “Never leave outside bins under a window or next to a garage,” advises Zoe. “Doing so can give a potential burglar easy access to the property.”

Insurance essentials

Has your insurance policy got it covered?

“Having adequate landlord insurance is essential at all times of the year but it becomes particularly pertinent when a property is empty and at its most vulnerable,” says Zoe.

“An insurance policy can help protect your pocket if something, such as a leak, happened which could cause considerable damage if left unnoticed in an empty property.

“Likewise, an insurance policy will be beneficial if a burglary was to occur. Burglaries can be commonplace in the summer months when occupants are most likely to be away.

“Always check your policy documents and read the small print. Some policies may require notification if a property is going to be empty for an extended period of time.”

Read all about it!

Shhh! Don’t advertise that there’s no one home…

“More and more of us our sharing our thoughts, feelings and whereabouts on social media,” says Mike. “However, this is unadvisable when on holiday or during an extended break. Uploading photos of landscapes and landmarks while you’re away is advertising that no one is at home, potentially providing an easy invitation for break ins.

“If your tenant is active on social media, perhaps chat to them about this and ask them to wait until they return before uploading their holiday memories.”

Zoe agrees and adds, “It’s important to be cautious about what is revealed on social media. Posting photographs of expensive equipment and valuable items that are kept at the property, for example, is not advisable.”

On time

Time it right with useful light timers…

“Providing light timers for the property can also be helpful in the fight against holiday crime,” continues Zoe. “These are small gadgets that are fitted to plug sockets and can be set to switch lights on and off while the property is unoccupied.

“However, be aware that if your timer is coming on and going off again at the same time each day this could signal that no-one’s home to a potential burglar who may have been watching the property for a few days.”

Be alarmed

Are your fitted security features fully functional?

“If the property has a burglar alarm make sure this is working correctly and that your tenant knows how to use it and has a copy of the manual,” says Zoe.

“The code should be a sequence that isn’t easy to guess, plus it’s also important to ensure that the code is changed regularly, particularly between outgoing and incoming tenants.

“Check your insurance policy carefully too. This may state that if there is an alarm at the property then this will need to be set when the property is empty as part of the policy agreement.”

Visiting rights

Proactive visits to the property while it is empty can help prevent problems before they progress.

“Before your tenant leaves for their break it can be useful to arrange for permission to enter the property during their absence,” says Mike.

“Regular visits to the property will allow you to check that all is well, plus enable you to troubleshoot in emergencies.”

“During your visit it’s advisable to check that cookers and taps have been switched off correctly, plus look out for signs of leaks, disturbance or theft.”

Article courtesy of Belvoir

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Keen to diversify your property portfolio? Consider looking at these countries

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Given the constant changes and evolutions seen throughout global politics the importance of diversifying your property portfolio to help protect yourself from adverse changes is significant. We have created a brief overview of recent changes in the property market of four countries we feel represent exciting areas to invest.

Spain:

The scepticism regarding investment in Spain is understandable. Over the last decade, the Spanish economy has undergone a terrible recession. The most notable crisis was the property bubble bust faced in 2007/08. However, since 2016, the Spanish property market has seen sustained economic growth, with house prices increasing. A combination of increased demand in Spain’s construction sector and increased lending goes a long way to explaining these changes.

Further to this, Rightmove has revealed that Spain remains the most popular destination for Brits looking to buy property abroad.

Ireland:

Over the last few years, the Irish market has experienced somewhat impressive growth.  However, in 2017 this has soared; Irish house prices have increased more in the first quarter of 2017 than the entirety of 2016. One potential region to look at would be North Dublin, the area that has experienced the largest rise in property prices. The Irish Times explains this rise as prospective buyers being “priced out of the expensive South Dublin property market”, forcing them to look elsewhere.

Australia:

Venturing outside Europe, Australia presents an interesting opportunity for prospective buyers. CoreLogic have revealed that the South East of Australia has experienced the highest rate of growth amongst the country; most particularly Sydney, in March 2017, experienced an 18.90% increase on the previous year.

Whilst there are many who continue to support the Australian economy, it is worth noting that there is a school of thought amongst some analysts that the Australian property bubble may burst. As such, it is worth approaching this with some caution, none the less, it is a country worth looking at.

Hong Kong:

Within Asia, Hong Kong is currently experiencing the most significant growth rates. When looking at House Price Indexes year on year, there is a general trend demonstrating sustained growth.

Moreover, Jones Lang LaSalle (JLL) has forecasted continued growth over the next 30 months predicting an increase of housing prices by 15%. This is partially explained by strong housing demand; household formation is currently outstripping transaction volumes.

Whilst these countries are not guaranteed opportunities, they do represent interesting prospects to have a look at if you as a landlord are keen to expand and diversify your existing property portfolio.

Written by Jafar Tabaqchali of Arthur Online.

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Does the deposit have to be physically returned ?

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I have a tenant in arrears.

The deposit was unprotected (i.e. not re-protected at renewal due to an admin error)

I offered the tenant the chance to use the deposit against the arrears, we agreed and he signed a letter stating the deposit had been returned. (This was around 2 years ago)

We are in court next week for a possession hearing.

Any advice ?

Thanks

Mick

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Poverty, evictions and forced moves

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Four people from the Cambridge Centre for Housing and Planning Research (CCHPR) wrote the report, and a summary, for the Joseph Rowntree Foundation (JRF).  That is to say, four of its members are credited with writing it.  However, it looks as though Generation Rent has had a hand in it as well. Statistics about one method of eviction, Section 21 (S21), have been given a prominence they do not merit, and precedence over the conclusions, and S21 has been given a misleading prefix throughout.

The conclusion near the end of the full report does not mention S21.  It is followed by 18 recommendations, but again S21 is not mentioned.  Yet the Executive Summary at the beginning of the report concentrates on Section 21 – as if it was taken from a different report.

A separate document was issued which summarised the full report and concluded that:

“Increasing eviction rates are linked to the overall growth of the PRS and to cuts to LHA. Whilst the greatest impact is being felt in London, similar issues were found in other high-pressure markets. The continuing programme of cuts and restraints on state assistance with housing costs will intensify this pressure.”

It does not mention S21, but the two biggest paragraphs in the Key points on page 1 relate to S21:

• “In the past 12 years, the rented sector as a whole has grown by nearly a half, and the number of tenants being evicted from their homes has grown by a third: 10,000 more tenants lost their homes in 2015 than in 2003
• The number of tenants evicted by private landlords exceeded the number evicted by social landlords for the first time in 2014
• The increase in repossessions in recent years has been almost entirely due to the increasing use of ‘no fault’ evictions, using Section 21 (S21) of the Housing Act 1988, which enables landlords to end an assured shorthold tenancy after the end of its fixed term, with two months’ notice, without giving any reason. Tenants do not have a defence against a valid S21 notice.
• The use of S21 is highly concentrated geographically. Four out of every five repossessions using S21 are in London, the East and the South East, and nearly two-thirds are in London alone, although London only has one-fifth of the private rented housing stock. Even within London, repossessions using S21 are highly concentrated, with a third occurring in only five boroughs.”

The last two key points are:

• “Changes in welfare benefits have combined to make rents unaffordable to benefit claimants in many areas.
• As a result, tenants on low incomes are being evicted because their benefits do not pay market rents, and they are unable to afford alternative homes in the private rented sector, or access social housing.”

This put the cart before the horse.  The last two sentences explain why evictions have risen. Section 21 is just the means used.  It is chosen in preference to Section 8 because it costs less in time and money, and does not require a court case.  It is no surprise therefore that its use increased when benefits stopped covering the rent.

Both the report and the summary use the term “no fault” to describe S21 evictions because there is no requirement to prove to a judge that there has been a breach of the tenancy agreement in the form of rent arrears or anti-social behaviour.

The use of the term “no fault” implies that there were no grounds for S21 evictions, that the tenants had done nothing wrong and were therefore being victimised. However, the report itself acknowledges that S21 is being used to evict tenants for rent arrears and for anti-social behaviour.  The term “no fault” is deliberately misleading, brainwashing people into thinking that if S21 is used the tenant cannot have been at fault.

The full report and the summary can be downloaded from a page on the JRF website:  https://www.jrf.org.uk/report/poverty-evictions-and-forced-moves

This has an introduction which includes the Key points from the summary report, except that the last two, above are missing.  So the rest of the introduction is a non-sequitur: “JRF is calling for the Government to end the freeze on support for housing costs, and uprate Housing Benefit in line with local rents.”  It also uses the term “no fault”.

A press release was issued about the report: https://www.jrf.org.uk/press/100-families-day-lose-their-homes

This says that “The increasing eviction rates are linked to the overall growth of the private rented sector and cuts to Housing Benefit, the report by the Cambridge Centre for Housing and Planning Research found.

“The rise is being driven by high numbers of ‘no-fault’ evictions by private landlords. [Emphasis added]  More than four in five of the increase in evictions are carried out under Section 21 – a law which allows landlords to evict a tenant after the initial rental period without giving a reason, and without any wrongdoing on behalf of the tenant.”  [Emphasis added]  This last phrase was not in the reports, and was added for good measure by the authors of the press release.  It implies that there were no grounds for these evictions, yet the report shows otherwise.

The press release does go on to explain that changes in benefits have made rents unaffordable to benefit claimants in many areas, and as a result tenants on low incomes are being evicted.

It continues “Four out of every five repossessions using S21 are in London, the East and the South East, and nearly two-thirds are in London alone. Even within London, repossessions using S21 are highly concentrated, with a third occurring in only five boroughs: Newham, Enfield, Haringey, Brent and Croydon.”  The authors probably don’t understand that landlords prefer the simple procedure of S21 to the more cumbersome procedure of Section 8.

Campbell Robb, Chief Executive of JRF,and Anne Baxendale, director of campaigns and policy at Shelter are then quoted as demanding that the government lift/abandon the freeze on Housing Benefit.  They do not mention S 21.

Finally, Anna Clarke, Senior Research Associate at the CCHPR, and the senior of the authors is quoted: “Alongside the difficulties caused by evictions, our research highlights the complete lack of options people on low incomes face when they lose their home. Greater protection from eviction is needed, but affordable, secure alternatives are too so people do not face even more stress and costs when they are forced to move.” [Emphasis added].

That gives us a clue as to who may have written the Executive Summary and the Key points that are so different from the conclusions and recommendations – by concentrating on “no fault” S21 instead of the HB freeze.

The Guardian then produced two articles based on the press release, to give S21 a good kicking

The first one, was by Michael Savage, Policy Editor with the headline:

“100 tenants a day lose homes as rising rents and benefit freeze hit”

https://www.theguardian.com/society/2017/jul/22/100-tenants-a-day-lose-homes-rising-rents-benefit-freeze

He didn’t just put the cart before the horse, he made it look as if they had nothing to do with each other.  He used the press release’s statistic about more than four-fifths of the increase in evictions being through “no-fault” S 21 before mentioning that Housing Benefit no longer covered the rent, but he did not connect the two things.

He wrote “High numbers of “no-fault” evictions by private landlords is driving the increase. More than 80% of the extra evictions had occurred under a Section 21 notice, which gives a tenant two months to leave. The landlord does not have to give a reason and there does not need to be any wrongdoing on the part of the tenant.” [Emphasis added]

Even after writing, “the study found that changes in welfare benefits have combined to make rents unaffordable to claimants in many areas,” he did not mention that was the reason for the evictions.  It was as if he was writing about two different groups of people – no-fault tenants who were being evicted for no reason, and people on benefits who were “struggling to meet their bills”.

But the article by Dan Wilson Craw, director of Generation Rent, was much more misleading.

“Landlords are turfing people out of their homes without reason – and it’s completely legal”

https://www.theguardian.com/housing-network/2017/jul/25/no-fault-evictions-landlords-tenants?CMP=Share_AndroidApp_Copy_to_clipboard

The headline is complete nonsense.  Nobody “turfs” people out of their homes, and nobody evicts tenants without a reason.

His article starts with “For every school in England there are five children without a home. The Local Government Association reports that 120,000 children are living in temporary accommodation. The primary cause of this homelessness is the end of a private sector tenancy, ie eviction.

Unfortunately, there is no official explanation for this, because private landlords don’t need to give a reason when they ask tenants to leave. In a study released on Sunday, Joseph Rowntree Foundation attributes 80% of the recent rise in evictions to this “no fault” process.”

The first paragraph is nonsense.  Eviction is not the cause of homelessness, it is merely the process through which it occurs.  The cause of homelessness is whatever triggered the eviction.  It can be the actions of the tenant.  It can be the needs of the landlord.  It can also be the actions of the government, driving landlords to sell up or increase rents due to tax increases (which ironically were supported by Campbell Robb when he ran Shelter).

The second paragraph is shameless.  The reason is in the full report, the summary report, and the press release: Changes in welfare benefits have combined to make rents unaffordable to benefit claimants in many areas.

He continued “While building more homes for long-term rent is important, we need a quicker solution. Ending section 21 could just be it.”  No it couldn’t.  Ending S21 could just be the last straw that drives small landlords out of the market.  About 1.7 million landlords have only one property, but they account for 38% of rental stock.

He went on: “Landlord groups claim their members only evict delinquent tenants and only use section 21 to do that, because it’s quicker than section 8. The English Housing Survey begs to differ, finding that 63% of evictions happen when a landlord plans to sell or otherwise use the property.”

This is a patently untrue.  No landlord group has ever denied that evictions occur due to the owner moving in or selling.  On the contrary, for two years now they have been telling all and sundry, including Generation Rent, that Osborne’s tax attacks are forcing landlords to sell with vacant possession.

“The majority of landlords, who are interested in keeping reliable tenants have no need for section 21.”  They certainly need it when their tenants become unreliable and stop paying the rent or become anti-social.  He clearly does not understand why S21 is used.

And “Landlords should be legally accountable for ending a contract early.  Enforcing a penalty for this type of behaviour, which could be paid to tenants, at a high enough rate that it could pay for setting up a new tenancy, would discourage blameless evictions.”   The very first comments beneath his article point out his ignorance: S21 cannot take effect before the end of the fixed period of a tenancy.

“Reforming this damaging law is Generation Rent’s top priority.”  He is so ignorant of the PRS that he does not realise that this would drive landlords out of the market and deter others from entering it, so that the stock of rental accommodation, already in short supply in some areas, will fall further while the population continues to increase.  This would make rents rise even more, to the detriment of the tenants he claims to represent. It would also cause an increase in evictions as landlords leave.  Is this the “greater protection from eviction” that Anna Clarke has in mind?

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Two children dead after couple sets a house on fire

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Arson attack on landlord:

A Washington couple is facing arson charges after they allegedly set fire to a two-story home, killing two young child residents, in their attempt to get back at their landlord.

It was reported by The Associated Press that Kimberly Marie Hughes, 32, and Jaramy L. Chism, 24, were evicted from their home in Mount Vernon. Just days later the deadly fire went through the building when Rose, 8, Xavier, 6, were killed.

Other residents in the building were awoken at around 2 a.m. to fine fire coming into their accommodation through the windows.

Two residents attempted to put the fire out, while one of the homeowners reportedly ran to rescue her two small children, the six-year-old boy and eight-year-old girl, from the second floor.

The woman is said to have attempted to pull the children through a window, but she fell out of the building whilst trying.

A statement said:

“When she pushed the screen to open it, she fell through the window, falling to the ground from the second story, the children did not make it out.”

The suspects had allegedly threatened to burn the house down after they were evicted.

Hughes, who has a previous arson charge, threatened a neighbour she worked for that she would burn the house down, the week before the fire.

The pair are each being held on $2 million bail and both deny the allegations.

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