Grainger ploughs into the PRS

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Build-to-Let:

Grainger PLC is to acquire, subject to planning, a site for a private rented sector (PRS) build-to-rent development at Gore Street in Salford, near Spinningfields, Manchester.

Grainger has identified Greater Manchester as a key marketplace its PRS investment strategy due to what it sees as its strong economic prospects and growth potential.

The £80m project will be forward funded by Grainger to be known as “UKLP Gore Street Limited” which will be a joint venture between UK Land & Property and Sir Robert McAlpine Enterprises, the latter being the main contractor.

Completion is anticipated for 2020 and will consist of 375 private rented homes with a mix of apartments and townhouses, with a range of amenities on site. Yield projections stand at c7% when fully let.

This acquisition is in line with Grainger’s divestment of its large portfolio of reversionary investments (occupied by regulated private tenants on Rent Act tenancies) and builds on its new strategy of targeting the private rented sector – build-to-let.

Grainger’s existing North West investments total over 1,200 rental homes, including its £100m investment at Clippers Quay in Salford which delivers 614 new rental homes. Construction is underway and first completions are expected in next year.

Helen Gordon, formerly of Nat West Bank and now CEO of Grainger, the UK’s largest listed residential landlord, said:

“We are pleased today to announce this significant £80m investment to deliver 375 new, high quality, purpose built rental homes in Salford, near Spinningfields, building on our existing portfolio in and around Manchester city centre and leveraging our operational platform and Manchester regional office.”

In her March financial statement she stated:

“I am pleased to report that the pursuit of our strategy is delivering strong results. In the first six months of the year we have increased adjusted earnings by 39% and net rental income by 11%.

“We expect this momentum to continue now that we have secured £439m of private rented sector (“PRS”) investment, over half of our £850m target, and have good visibility on additional investment opportunities to meet our overall target. We are making good progress delivering our pipeline, and on average we are completing a new PRS building every two months over the next two years.

“Grainger is a focused, simpler and more efficient business. We have made changes to the way we operate in order to enhance returns, through reducing costs, simplifying processes and improving the scalability of our operating platform.

“The private rented sector growth opportunity is compelling with strong investment fundamentals. Our strategy to grow rents and simplify and focus the business puts Grainger in a strong position to deliver further sustainable income led growth.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Grainger ploughs into the PRS | LandlordZONE.

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Concerns over unintended consequences of fees ban in Commons debate

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The House of Commons debate held this morning was organised by Kevin Hollinrake, MP for Thirsk and Malton, and co-founder of Hunters Estate Agency was to look at the proposed lettings fees ban.

The proposed bill also includes capping security deposits at one month’s rent and holding deposits at one week’s rent.

The majority of MPs that took part in the debate did at least acknowledge concerns over the unintended consequences of a total fees ban for small businesses and low income or non UK tenants along with potential for rising rents and job losses.

However, Housing Minister, Alok Sharma, confirmed that holding deposits will be excluded from the legislation.

Mr Sharma said that the problem with fees is that the agent is chosen by the landlord giving the tenant little opportunity to negotiate or opt out of these fees. “A landlord is better placed to pay reference and credit check fees and anyway it is they who ask for the checks to be completed, not the tenant.”

Henry Bellingham, MP for North West Norfolk said he had received no complaints from tenants about letting agent fees with the average application fee being £325 and the average renewal fee £75.

Mr Sharma confirmed the government’s response to the fees ban consultation would be published very shortly and acknowledged that the ‘broken’ housing market remains one of the greatest barriers to progress in Britain and he felt capping fees would be largely ineffective as it would be harder to understand and enforce.

David Cox, chief executive of ARLA Propertymark, commented on the debate saying: “We welcome this morning’s comments from Kevin Hollinrake MP around the unintended consequences of a total ban on letting agent fees.”

“It’s important that the government understands the value of the services agents carry out for both landlords and tenants when shaping its final legislation.”

“We are therefore disappointed in Alok Sharma’s comments today declaring that the government’s position remains that all fees will form part of the ban.”

“As Kevin acknowledges, the ban on fees for referencing checks will cause problems. Agents are required to carry out these checks by law, and they invest both time and resources to ensure this work is carried out properly.”

“The government must now consider exempting referencing checks from the ban as well.”

National Approved Letting Scheme (NALS) CEO, Isobel Thomson, replied: “NALS welcomed the cross party debate on the fee ban and confirmation that the Minister has adopted a common sense approach on holding deposits with his announcement that they will be exempt from the ban, but he gave no clear indication of when legislation might come forward.

“We were encouraged that MPs quite rightly expressed concern about the implications of rent increases as a result of the ban and the impact on those least likely to afford them. Of real interest was the Minister’s commitment to consider the ban on tenant fees in the context of wider work in the private rented sector, something NALS called for earlier this year. This is positive news and an indication that he has listened to the call for an end to piecemeal legislation. His clear reference to regulation was welcome as well as his willingness to explore options for what a regulatory framework might look like.”

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Ocean View Sandown – Luxury retreat investment on the Isle of Wight

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Ocean View is a luxury retreat for the over 50s situated on Sandown Bay on the Isle of Wight. Due to the Isle of Wight being such a popular destination for older holidaymakers, a 10% net rental income for 10 years is guaranteed.

Residents can fully relax and enjoy fine dining experiences, a heated swimming pool, hair and beauty salons, a gym, spa and beautiful landscaped gardens. The existing building will be transformed into 60 studios and apartments and provides a mix of supported breaks, short stays and longer stays for those in later life.

Suites at Ocean View Sandown start from £89,950 with a net return of 10% per annum over a 10 ten years lease. The attractive returns are complemented by two guaranteed buy-back options in years 5 and 10 at 110% and 125% respectively. Units can be reserved for as little as £2,000.

Why Invest in Retirement Property in the Isle of Wight?

A quarter of the Isle of Wight’s population is aged 65 or over. As young people are leaving the island to chase jobs on mainland Britain, elderly people are settling on the island to take their place. Enquire today using the contact form below to find out how such a high percentage of over 65s can result in a lucrative opportunity for investment.

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Fire safety and landlords legal obligations

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This is the 10th post in my 2017 Legal Update series.

On the morning of Wednesday 14th June, I was due to travel down to London for a meeting. I got up early to do some admin, and then turned to the online version of the Guardian website.

I was transfixed by the horrific picture of a burning tower block. It haunted me for the rest of that day and it is still often in my thoughts. I am sure you will also remember it – and remember too where you were when you first saw it.

Grenfell and its aftermath has shaken us all and raised many questions

• What was the duty of care of Council officials to ensure that the building was fire safe?
• Why weren’t the fire regulations tightened up after similar fires in 2013?
• What does this incident tell us about our society and the differing standards applied to housing for ‘rich people’ and ‘poor people’.

Coming a bit closer to home – how does this affect YOU? We have all become much more sensitive to fire safety, but what are the actual obligations upon landlords in the private sector?

Test your cladding

The first thing to say is that if you have external cladding on your properties, particularly if it is a high-rise building, you should consider getting it tested (or ask for it to be tested if you do not own the block). There may be government help for this which you can read about here (NB you will find all the announcements relating to Grenfell here.

But what are private landlord’s legal obligations?

The Law

The main legislation is the Regulatory Reform (Fire Safety) Order 2005. This requires landlords (or the person who has control of the property – which could be the letting agent) to carry out fire risk assessments for properties.

There is no prescribed way to do this and it depends on the circumstances. If the property is a bungalow and all doors and windows open out onto the ground floor, then provided you have the proper smoke alarms fitted, you will probably be alright. However, if the property is a high-rise building, it would be best to get a proper professional fire risk assessment report done by a specialist company.

If you are managing an HMO there may be extra requirements – you will need to speak to your Local Authority about this.

The other important thing to bear in mind is the Local Authority powers under the Housing Health and Safety Rating System which come under the Housing Act 2004. Fire is one of the 29 hazards which EHOs have to test for. If your property fails the test you could be facing an improvement notice.

Smoke alarms

You should now have fitted smoke alarms on all floors of rented property and CO alarms in all rooms with solid fuel burners.

These regulations came into force on 1 October 2015 and I did a post on the blog at that time here. If you have not got these alarms fitted, make sure that you do this asap.

Further information:

There is quite a lot of information online in particular on Local Authority websites.

So far as our 2017 Conference Course is concerned, I have included fire safety expert Warren Spencer’s talk to our 2015 Conference as a bonus item – the law has not changed significantly since 2015.

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16th September.

We also had a webinar on Fire Safety for our Landlord Law members recently as part of our members training, and the recording of this is available for Landlord Law members on the site.

You can find out more about Landlord Law here

Tomorrow I will be discussing leaseholder landlords

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

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London commercial property sees strongest trading in 10 years

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Record Commercial Sales:

London commercial property has hit an £llbn record so far this year, with the City of London seeing it’s strongest trading in a decade.

Savills, the property agency and consultancy, has produced data which shows July turnover was £2.1bn across 11 deals, equating to an average lot size of £190.92m. The sale of The Walkie-Talkie, 20 Fenchurch Street, EC3 accounted for 61% of July’s turnover. Total turnover for the year has now reached £7.4bn across 77 deals (£96.10m average lot size), which is 51% up on this point last year. The rolling 12-month total turnover is currently £10.6bn, 41% up on the long-term average.

In the City market, Savills say they are currently monitoring 57 investment opportunities totalling circa £4.1bn. Of which, 22 are currently under-offer totalling circa £0.8bn, leaving an estimated £3.3bn worth of available opportunities. The 10 largest available assets account for 75% of total availability.

In London’s West End market, £262m was transacted in the same month, with the largest deal the sale of a building on the Strand, for £68.25m.

Asian investors continue to dominate the market, accounting for 63pc of total City turnover year-to-date, followed by European investors, at 17pc and UK investors at ll%. In the West End market, Asian investors accounted for approximately 50pc of turnover to end July, with UK institutions accounting for just 2pc of acquisitions by value.

Savills prime City yield remains at 4.00%. The spread between the City and the West End is still just 75bps with the West End prime yield currently at 3.25%

Stephen Down, head of the Savills central London investment team, told the Daily Telegraph that the value of deals for 2017 as a whole could surpass last year’s total of around £17bn:

“Although the restrictions announced earlier in August by the Chinese government will reduce £2.35bn. However, we have noticed their buying criteria has become increasingly selective.”

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FCA looking to bring back Retirement interest only mortgages

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The Financial Conduct Authority (FCA) is looking to allow the reinstatement of Retirement interest only mortgages on main residences by excluding them from the definition of a lifetime mortgage.

In a consultation paper the FCA plans to class Retirement interest only mortgages  as a separate interest only mortgage for older consumers where, assuming there is no default, the loan is only repaid on a specified life event such as the customer’s death or move into residential care and the sale of the property.

The FCA thinks that these interest only loans into retirement could help older people whose mortgages are reaching the end of term with no, or a short fall in, repayment vehicle. Also older borrowers looking to release equity without wanting the final cost of rolled up interest when the property is sold or inherited.

The consultation paper said: “Retirement interest-only mortgages have significantly different risks compared to lifetime mortgages. In particular, they do not feature the roll-up of interest, meaning that consumers are not at risk of rapid equity erosion and the subsequent reduction of funds available for a bequest.

“Consumers are also more likely to be familiar with the product features of a mortgage involving interest payments. However, we do consider that there are some risks associated with lending with no fixed term and we are proposing to add a small number of additional requirements for the sale of these loans.”

Alice Watson, Head of Marketing at Retirement Advantage Equity Release, told the Financial Reporter: “It is great that these proposals could lead to a wider range of options available to older borrowers, but retirement interest only mortgages are not the only option. Retirees should ensure they are considering the full range of solutions available to them.

“Lifetime mortgages are a viable and a flexible option, and provide a number of safeguards that the proposed retirement interest only mortgages may not offer. Lifetime mortgage customers can choose an interest only option, where they repay just the interest on their equity release mortgage. One difference between this and the proposed retirement interest only mortgage is that, if customers miss their monthly interest payments, they can switch to interest roll up without threat of repossession, so long as they abide by the terms and conditions, which offers customers real peace of mind.

“The proposed retirement interest only mortgage may also be offered without the client needing to take financial advice. We believe this carries its own risks and could potentially leave the customer worse off. With lifetime mortgages, customers have the safeguards of financial advice, which means that a holistic overview to their retirement planning has been taken and the most appropriate solution has been recommended. Without seeking professional financial advice, there is a risk that customers may not be aware of which products are best for their particular circumstances.”

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Should Authorities Take More Responsibility When Paying Housing Benefits?

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All Good Landlords detest the phrase “rougue landlords” but we have to accept they exist, just as rogue Police Officers and rogue vicars do. The difference is that the Police and the Church take responsibility for their rogues, as do many other organisations.

What prompted me to write this post is that a “rogue landlord” was quite rightly prosecuted this week. He had converted a former hotel in Harlesden, into 26 studio flats without seeking council permission back in 2011. He was issued with an enforcement notice in March 2012, but failed to comply. The flats each measured between 9 meters squared and 20 metres squared, despite the minimum size for a studio flat in the capital being set at 37 metres squared and the building was reported as having poor insulation, thin walls, bad maintenance and insanitary conditions. The landlord has been issued with a £300,650 confiscation order and also ordered to pay £20,000 in fines and £18,268 to cover Brent Council’s court costs. He has been given three months to pay the confiscation order in full, which will be distributed between the government, the courts and the council.

What irks me is that Brent Council reports that the landlord housed over 100 vulnerable tenants, earning thousands of pounds by letting sub-standard accommodation. My natural inqusitiveness leads me to wonder:-

• Why was the payment of housing benefits authorised?
• Did the Council refer any of these vulnerable tenants?
• Should Councils be held accountable for making referrals and benefits payments in such circumstances? They may not know about the conditions of the property from day one but another question which I feel really ought to be asked is whether they continued to pay benefits after they learned about the conditions?
• Also, did the Council immediately re-house all of those vulnerable tenants as soon as they found out about the appalling conditions they were living in, and if not why not?

Perhaps somebody would like to file a Freedom of Information request to check and report back here?

The Council will benefit from the proceeds of the confiscation order, but will they take any responsibility for using the tax payers money to pay housing benefits to this landlord? This is a rhetorical question, OBVIOUSLY!

I look forward to reading your comments.

Please share this article on Social Media.

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Commons to debate letting fees ban

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Kevin Hollinrake, MP for Thirsk and Malton, and co-founder of Hunters Estate Agency has called for a debate on the lettings fees ban in the House of Commons this morning.

The Fees ban was announced in last Autumns Statement and is expected to come into force in the next year, but as yet without a firm date.

This has lead to much commentary indicating this will only result in costs incurred by agents having to be recovered by increasing monthly rental amounts so the tenant will not be any better off.

The proposed bill also includes capping security deposits at one month’s rent and holding deposits at one week’s rent. Again the cap on security deposit amounts may adversely affect tenants finding properties that will allow pets that are more likely to cause damage or tenants with less than perfect payment histories.

During the consultation period for the bill the Housing Minister, via MoneySavingExpert.com, received over 4,700 public responses to a request for views specifically on:

• Their experiences of letting agent fees
• Which fees they consider fair or unfair
• How they feel about the prospect of fees being transferred from tenants to landlords when a ban is introduced
• If tenants take varying tenant fees into account when looking for a rental property
• Would the public welcome the licensing of agents and landlords

The response to these views has been collated to be used in the debate which can be viewed on Parliament TV.

David Cox, chief executive of ARLA Propertymark, has said the fees ban will cause “unprecedented damage to the rental sector”and he reported that “independent analysis commissioned by ARLA Propertymark, following the UK government’s announcement of its own ban, revealed that if a full ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.

“In our submission, ARLA is calling for fees associated with referencing to be left out of any ban. Right to Rent checks will soon be a service that agents in Wales will be required to undertake by law so it is only right that agents should be able to recover the associated costs, given the time and resources needed to carry out such checks.”

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Tenancy Agreements and how to get them right

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This is the 9th post in my 2017 Legal Update series.

All tenancies should have a tenancy agreement. It is legally possible to create a tenancy without one but you would be foolish to do so.

For example, I was contacted a while ago by a landlord who had allowed his tenant into the property without signing a tenancy agreement first.

“I got in touch with my tenant when he failed to pay the rent” he told me “only for the tenant to say that he was exercising his right to pay rent in arrears. Can he do that?”

My answer was, I am afraid “Yes, he can”. Under the common law, rent is payable in arrears. Tenants are only obliged to pay rent in advance if their tenancy agreement says so.

This is just one of the many ways in which landlords can protect their position by using a properly drafted tenancy agreement.

Unfair terms

One of the things covered by the consumer law I discussed in an earlier post (Consumer Law and why you should be worried about it) is the legislation prohibiting unfair terms in consumer agreements. These ‘unfair terms’ rules are now part of the Consumer Rights Act 2015 but have been with us for a long time.

They are the main reason why it is unwise for landlords to hack into their professionally drafted tenancy agreements and change them without legal advice.

For example, a clause will normally be unfair if it takes away a right a tenant would normally have in law. But how can you know whether you are doing this unless you have an encyclopaedic knowledge of what tenants’ rights are in the first place?

Then there are prohibitions. If you want to prohibit something a tenant would normally be able to do, such as re-decorate the property or keep a pet, your clause must contain wording providing for the tenant to request permission to do whatever-it-is and say that the permission will not be unreasonably refused.

Countless landlords have invalidated their pets clauses by removing this wording on the basis that “we will never allow pets in our properties”.

Maybe you won’t allow cats and dogs (and this will usually be reasonable) but what about a stick insect in a jar? Or (as per the leading case for this) a goldfish in a bowl?

The fact that tenants can request permission for something does not mean that you have GOT to grant it. Often it will be totally reasonable to refuse your permission (and you should do so). But if you deny tenants the chance to request permission – this will invalidate the clause, meaning that there is nothing to stop them keeping whatever pets they like.  Or doing whatever else the clause is prohibiting.

Protecting your position

Tenancy agreements need to be fair and ideally written in plain English, but this does not mean that they cannot include clauses to protect the landlord’s position. For example:

Data Protection – you should include clauses notifying tenants that you will provide their details to utilities if they default on payment and to your own tracing agents if they leave owing you money

Right to rent – make sure that everyone living in the property (not just the tenants) are named in the tenancy agreement and include a clause saying that no-one else is allowed to live there.

Contractual periodic tenancies – a recent case (Leeds City Council v Broadley) has held that although tenants are not liable for Council tax where a tenancy is a statutory periodic, a contractual periodic tenancy counts as part of the original tenancy and so satisfies the requirement that a tenant has a ‘material interest’ of 6 months or more’ in the property. Meaning that the tenants will be held liable by the Council. Not you. (NB All Landlord Law tenancy agreements provide for contractual periodic tenancies for this reason).

Further information:

You will find a lot of guidance in the ‘Tenancy Agreements 33 Days of tips’ series on my Landlord Law Blog.

Turning to our Conference Course, I do a talk on Tenancy Agreement Clauses, plus the Consumer Law talk has a lot of useful information about unfair terms (which come under the consumer legislation).

You will find more information about the Conference Course here.  There is a discount voucher for Property118 readers which is pp118cc30 – apply this on the checkout page and it will reduce the payment by 30%.  Note however that the coupon will expire after 16th September.

If you are looking for a tenancy agreement for your property, Landlord Law has a huge selection of templates plus you can always ask me (if you are a member) to help you draft any special clauses you may need or ask me any questions you may have about the correct tenancy agreement to use for your situation.

Our special tenancy agreements include HMO type agreements for a room in a shared house and agreements where the landlord pays the bills.  If you are a student landlord we also have special student tenancy agreements designed to protect landlords – for example if you agree to rent the room over the summer at a lower rent.

There are also special forms you can use if you want to permit one of your tenants keep a pet, which incorporates special pet related clauses to help you, and we have similar forms (but with different clauses!) if you agree to allow your tenant to run a home business or rent a room to a lodger, along with our guarantee and renewal forms.

Note that Landlord Law members get unlimited use of all our tenancy agreements (plus also the letters, notices and other documents which you can create via our ‘document generator system’).

You can find out more about Landlord Law here

Next time I will be writing about fire safety.

Tessa Shepperson is a specialist landlord & tenant lawyer and runs the popular Landlord Law online information service.

To see all the articles in my series please Click Here

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Section 21 Notice and Deposit Protection rules

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Validity of Section 21 Notice: Amak Property Investments v Laura Sonny [2016]

This case was an appeal by the tenant following a county court judgement relating to the validity of a s21 notice on the basis that the landlord had not complied with the deposit protection (MyDeposit) scheme rules.

The wording in the relevant Act (Housing Act 2004) has no mention of protecting the deposit as such but states that the landlord or letting agent must comply with the ‘initial requirements’ of the deposit scheme.

These initial requirements would usually mean protecting the deposit and serving on the tenant the required prescribed information, both within 30 days.

If the deposit is not served within 30 days the landlord is in breach of the rules, subject to a fine and cannot use the s21 eviction process. That is unless the deposit is returned to the tenant, in which case the landlord can serve a valid section 21 notice but is still subject to a fine if the tenant should apply to court for compensation.

If the prescribed information is not served within the 30 days, according to the wording in the Act, the landlord cannot use the section 21 process, but in this case the prescribed information can be served late to effect the serving of a valid section 21 notice. However, the landlord is in this case is still be subject to the fine.

Following the failure of Laura Sonny’s defence, filed against the landlord’s s21 possession claim at the county court, the appeal was heard at Central London before Recorder Klein.

Ms Sonny’s defence had hinged around a disputed issue of whether or not the prescribed information had been served prior to the service of the s.21 notice, which the county court had found not to have a reasonable prospect of success, based on the MyDeposits scheme rules, specifying that service of the prescribed information constituted an “initial requirement” of the scheme.

The landlord argued that s.215(2) of the HA 2004 had been complied with as the prescribed information had been served by the time of the service of the s.21 notice.

Ms Sonny’s case was that the scheme rules meant service of the prescribed information was an ‘initial requirement’ and that failure to comply with this, within 30 days meant s.215(1A) applied, and therefore a valid s.21 notice could not be served, unless s.215(2A) had been complied with – the landlord had returned the deposit.

Recorder Klein allowed the appeal and Ms Sonny’s defence was accepted, the appeal judge finding that the s21 notice was invalid because the landlord had failed to serve the prescribed information within 30 days as set out in the scheme’s ‘initial requirements’.

The judge argued that the MyDeposits scheme makes service of the prescribed information an initial requirement, so failure to comply came under the sanctions at s.215(1A) not s.215(2). So the landlord needed to return the deposit to the tenant – with any agreed deductions – before a valid s.21 could be served.

The case underlines the importance of landlords and agents to be fully conversant with whichever scheme they are using, as had the landlord used a different scheme, which does not make serving the statutory information within 30 days an ‘initial requirement’, the notice would have been valid.

This was an appeal heard by a Circuit Judge and not the High Court, therefore it is not binding. However, does give a valuable steer for landlords and agents and for District Judges.

It is also interesting that it gives landlords and agents at least some high degree of confidence that returning the deposit can enable them to serve a valid s21 notice if either the deposit or the statutory information, or both, were not served within 30 days.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Section 21 Notice and Deposit Protection rules | LandlordZONE.

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