Annual housing market summer slowdown

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NAEA Propertymark is issuing its May Housing Report and Mark Hayward, Chief Executive, said:

“We see this every year. House hunters desperate to get their offer accepted, and sellers on a mission to find suitable buyers, flock the market in May.

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Asbestos and Your Responsibilities as a Landlord

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Asbestos:

Asbestos regulations were last updated in 2012, bringing the UK in line with EU regulations, which means the current regulations have been in place long enough for most experienced landlords to be familiar with them. The regulations were put in place due to the harmful nature of asbestos which led to around 3000 deaths in 2015 alone, with this number potentially rising for the next few years, not beginning to decline until well into the 2020s.

Landlords of residential and industrial properties have been dealing with the problem of asbestos for decades. Legislation on removal is widely available but can often depend on terms within the tenancy agreement making it rather confusing who is responsible in any one situation. Below we address some common, but confusing asbestos removal situations and address some of the legal ramifications of failing your duty to manage asbestos risk.

It is important to note that your duty to manage does not mean you have to remove all traces of it from your properties. Often asbestos will be in a good condition and should be encased with appropriate materials rather than disturb it more trying to remove it, as this may cause even more of a danger. Your risk assessment or asbestos survey should identify the material in your building and also report on condition, giving you a reasonable idea of the course of action required.

Residential Properties

Responsibility for asbestos in residential properties depends, in part, on the agreement made with the tenant; in most cases, your duty as a landlord will extend to carrying out risk assessments before work is done by contractors, but not much beyond that. However, it is also stated that you should minimise the risk of tenants’, visitors’ or contractors’ risk of exposure, so you can’t just carry out a risk assessment on a flat in your building you want to rent, find it has asbestos and then leave it – you have to take to right actions before renting it and continue them through a tenancy. Residents also have a responsibility to help you monitor asbestos, so if it’s damaged, they don’t tell you but try to claim you’ve been negligence in your duty, then their case would fail.

Common areas of buildings don’t hinge on residents informing you of necessary repairs; it is your responsibility to maintain hallways, stairways, entrances and any other parts of the building that are not a private unit. You need to risk assess these areas and then take steps to ensure their regular monitoring and maintenance, as well as informing any tradespeople of asbestos dangers. Failing to do so could expose you to action from local councils or even directly from tenants or contractors in the form of negligence claims.

Commercial Properties

Those in the North East, the North West and Scotland are most likely to have to deal with asbestos in buildings, and those dealing specifically with property around old shipbuilding yards, steel plants or other old industrial buildings will need to be hyper-vigilant.

As with residential properties, the duty holder for a commercial property will depend upon the terms of the occupancy, but if none is stated it will revert back to the landlord by default. The guidance given for asbestos mainly talk about risk assessing and “managing risk�, but the plain fact of the matter is that you have to prevent tenants being exposed to asbestos. With commercial properties the likelihood of asbestos being in a poor condition or becoming damaged is greatly increased, so records of asbestos location, condition and passing on the information to commercial tenants are especially important.

Even if the agreement you have made on the lease states that the tenant is responsible for dealing with any upkeep or maintenance of the building, if you fail to carry out appropriate surveys and checks before leasing the property, you could be liable for injury caused by the substance. This is because you did not fulfil your duty to manage before the property was put in the care of someone else; without the correct knowledge shared, they could not put in place the right safety precautions. The duty of care also covers derelict or empty premises, as specified by the government and HSE, to avoid precisely the situation above.

The penalties for failing to carry out your responsibilities could mean a £20,000 fine and up to 12 months in prison, but if your negligence is severe the fines can be unlimited and imprisonment can be up to 2 years. Asbestos regulations might seem to be a constant irritation you have to deal with as a landlord, but the law is in place for good reason – to protect the health of current and future generations from harm – and with an estimated 18 million homes, not including industrial sites, thought to contain asbestos, it’s a business and social responsibility landlords have to bear.

Author:

Your Legal Friend has over 30 years’ experience in the legal industry and specialises in several sectors including personal injury, professional negligence and group litigation. We are Lexcel accredited, and Law Society accredited in two areas as well as being part of several solicitors societies dedicated to maintaining the integrity of legal practice in the UK.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Asbestos and Your Responsibilities as a Landlord | LandlordZONE.

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Call of the week: Section 21 documents

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This week, we had a typical call about this as the landlord was mystified about when he needed to serve the documents on his renewal tenancy.  The tenancy began in July 2017 and is set to become a statutory periodic tenancy on July 1st 2018.  The landlord planned to serve a Section 21 notice in […]

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Structuring BTL portfolio business?

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I am taking the plunge into BTL and planning to build a property portfolio over 8 years. I would like to get general opinions and people with more experience about my business plan going forward.

Background:-

1.

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Top 10 PRS Cost Considerations for Landlords

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Build-to-Rent:

According to the most recent Government paper on the issue “Building the New Private Rented Sector: Issues and prospects, the Private Rental Sector (PRS) is now the second largest housing tenure in England, having overtaken social housing in 2011.

Since 2010, the Government has focused on institutional investment in the PRS to boost supply and answer the challenges of the housing crisis in the UK.

With the majority of PRS homes in the country supplied to market by buy-to-let landlords, Tower Eight explores the significant cost issues around the Build to Rent model and how landlords can mitigate them:

1. Building Fabric & Balconies

There is the need to balance the architectural aspect, planning element and greater consideration around durability of materials, their replacement and clearing. The operational considerations should be also be reviewed to include greater provision for cleaning and maintenance. It will come down to a balance between practical access and the aesthetics of the scheme.  But the ability to facilitate the ongoing maintenance of the building will inevitably be much more of a consideration than on scheme with units for sale.

1. Modular Components

As the BTR model expands, there will be growth in the supply chain that services this element of the market and with this will come more specialisation of components.  In turn, this will reduce build time and cost as the sector matures. As the sector evolves and suitable components become standardised, and where there is repetition across schemes, then the costs will start coming down even more in the area.

1. Apartment Fit Out 

BTR schemes will generate a significant body of work around the life cycle costing of wall and floor finishes against the refresh period of units.  A key element of this assessment will be the use of durable products that can be easily replaced due to high usage and different occupiers over the lifecycle of the scheme.  This will also involve the substitution of high end fixtures for those that offer more durability, much as we see a balance between practicality and quality in the hotel model.

1. Amenity Spaces & Offering

There needs to be a balance between communal space and the additional facilities that are provided within the scheme to those that are available locally.   Arguably, PRS planners need to work even harder to generate a sense of place and introduce elements that encourage long-term occupancy, while also developing a sense of longer term brand loyalty.

It is about understanding how flexible these spaces, are and how could they be adjusted to reflect demand in the future.  In recognition of the need to adapt to tenant demand, amenity areas should be kept flexible as use may change depending on demand and demographic of tenant base – this should be incorporated in design so that the cost of change is kept minimal.

1. Communal areas

Proper consideration of the design facets of communal areas will extend the tenants’ demise.  If it retains customers for the long-term and improves a sense of “brand� then it will need to be in the costs. This will also lead to other considerations such as the introduction of natural lighting in communal areas and furnishing requirements.

This initial outlay may ultimately benefit the scheme by enticing a different kind of end user, and one that is more engaged with the property.  And this carries benefits both in the short and long term, if the scheme can operate at a different pricing level and retain clients for the long term.

1. Unit Sizes & Mix

Both the mixture of units on the scheme and their sizes will have to be led by higher density schemes to ensure the fundamental business case stacks up.  In a market where land values are as high as they are, the higher unit density will increase the revenue generated per sq. ft. and, ultimately, make these schemes competitive with the residential sales model.  The schemes will have to be designed for functionality and be highly efficient with unit sizes closely aligned to rental value and price points that have been scrupulously researched.

1. Mechanical Electrical and Public Health Systems

The careful adoption of the right technology will ensure that elements of these schemes do not become quickly obsolete as that would obviously impact on their ability to provide a long term solution for tenants.  And, it will also affect ongoing rental value and drive up the cost of refurbishments so they must be futureproofed from the outset.

1. Procurement

To gain significant competitive advantage and deliver on the necessary housing numbers, developers need to be thinking about seven or eight schemes at a time and benefit from the ensuing economies of scale.  This will facilitate programme wide procurement and service level agreements, all of which we contribute to scalability and a lower cost model.

1.  Warranties 

As the operator of the space,  the developer will fall liable for the upkeep of these goods – that is the way many PRS schemes are now going – and ensuring sufficient warranties will minimise that risk but increase costs in the short-term.  Latent defects insurance will also come into play too by which to recover the costs of replacing, strengthening or repairing the site if an inherent defect is discovered.

1. Refurbishment 

Responsibility will sit with the operator of PRS schemes to maintain its standards, so the ability to replace fixtures and fittings, and the durability of these items must be factored in.  Similarly the longevity of the building itself must be maintained as these schemes are a long-term play and any signs of fatigue will impact on the long-term rent-ability of the scheme.  All of these elements will play a key role in developing and maintaining the brand of the schemes and the operators responsible for them.

Conclusion 

The PRS has changed so much in recent years but our experience of the market would suggest that the real force of change is set for the next few years.  The industry-approach to PRS development is evolving.  Developers are now taking a different approach to amenity space, planning for long-term engagement with the client and, in essence, building brands for the future.

This approach appeals to both investors and tenants alike, but for it to be truly successful does require it will change the approach to both development costs and operational costs.  Ultimately the consumer is already asking more questions of PRS developments and developers need to be ready to answer them.  A progressive approach to these schemes is the only way forward and understanding the investment required to go alongside this approach is critical to success.

About TowerEight

TowerEight is an experienced, independent, project and cost management consultancy, which provides first class services to the construction and property industry. The team pride themselves on finding intelligent solutions for our clients and conduct themselves with a “total commitment to deliver as trusted partners�. With a team of over 70 based in headquarters on London’s Great Portland Street, TowerEight offers a range of services including project management, cost management, project monitoring, and acquisition support services.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Top 10 PRS Cost Considerations for Landlords | LandlordZONE.

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ExPat BTL Mortgages for UK Properties

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I would like some advice or guidance on the matter of Expat mortgages. I am a British National and have lived and worked outside of the UK for over 20 years. I already have a small portfolio of 5 x BTL’s in the UK and have had these for approx.

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Onward Report Riddled with Errors says RLA

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Onward Report:

A new think tank is fundamentally wrong in its analysis of private rented housing and the number of buy-to-let mortgages is falling, not rising.

In its first report, focussed on housing, the Conservative supporting Onward, claims that at the end of 2017 buy-to-let lending was above the 2007 peak. In fact new buy-to-let lending for house purchases has fallen from over 183,000 loans in 2007 to just 74,900 in 2017, a fall of nearly 60 per cent, according to figures from UK Finance, formerly the Council of Mortgage Lenders.

The total number of buy-to-let mortgages, including re-mortgages, also fell from 339,000 in 2007 to 227,000 in 2017, a drop of a third.

The private rented sector is actually shrinking with the Government’s own statistics showing that the number of private rented dwellings in England fell by 46,000 in the year to March 2017.

The report argues that landlords are taxed more advantageously than homeowners. This is not the case according to the respected Institute for Fiscal Studies which said following tax rises imposed on the private rented sector in 2015: “The tax system is not, and was not, even before the recent changes, more generous to people buying to let.�

On the back of its false assertion, Onward calls for further tax increases to reduce investment in new homes for private rent.

It argues that if the country had kept the ratio of privately-rented to privately-owned homes the same between 2000 and 2015, it would have ended up with 2.2 million more homes in owner-occupation.  This ignores the question of whether all of these households would have been able to afford a home of their own, especially as house prices rose by 154 per cent over that period.

With another report today saying that it now takes a single, first time buyer an average of ten and half years to save for a 15 per cent deposit for their first home, the RLA argues this is leading to increasing demand on the private rented sector and to take action now that would further reduce supply would just make finding somewhere to live more difficult and more expensive.

David Smith, Policy Director for the Residential Landlords Association, said:

“Today’s report is riddled with errors and fails to address the fundamental point that we need more homes to rent, not less.

“Rather than coming out with ideological assaults on the private rented sector, we need to reform tax so that it encourages the development of new homes to rent and longer tenancies so that the sector can adequately provide the pathway for tenants to go from renting to home ownership.�

• The Residential Landlords Association: The home for landlords
• The RLA represents the interests of landlords in the private rented sector across England and Wales. We are home to over 50,000 landlords nationwide, with a combined portfolio of over a quarter of a million properties. A growing community of landlords trust and rely on us to deliver day-to-day support, expert advice, government campaigning, plus a range of high-quality services relevant to their needs.
• It campaigns to improve the private rented sector for both landlords and tenants, engaging with policymakers at all levels of Government.  Our vision is to make renting better for everyone involved in the private rented sector.
• Paul Johnson, Director of the Institute for Fiscal Studies gave evidence to the House of Lords Economic Affairs Committee on 8th March 2016 as part of its inquiry into the housing market. The transcript can be accessed here

He told the committee:

“If you buy to let, you pay income tax on the return and capital gains on what comes out when you sell it at the end, which is not the case for owner-occupiers. The current system is clearly more tax favourable towards buyers and owner-occupiers than it is towards buy-to-let landlords and renters. The tax system is not, and was not, even before the recent changes, more generous to people buying to let.�

• The Government’s latest Dwelling Stock Estimates for England can be accessed here It notes that between March 2016 and March 2017, the private rented stock decreased by 46,000
• RLA PEARL’s analysis of buy to let mortgage data can be accessed here
• Nationwide publishes its UK House Prices index since 1952 and here

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Onward Report Riddled with Errors says RLA | LandlordZONE.

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New ‘How to Rent’ Guide!

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I’ve done a couple of tenancies today and the ‘How to Rent’ guide this has changed in the last 20 minutes!

I wonder what would happen if I had actually signed both of these tenants up today with one before the change and one after?

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Important: Government “How to Rent� guide updated

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The Government has issued an updated version of its How to Rent guide with landlords reminded they MUST make sure new tenants, or those renewing have the correct version. Landlords entering into tenancies have to give this new version to their tenants as of today, or they are leaving themselves at risk, with Section 21 notices […]

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Forum Spotlight-Providing tenants with fans during heatwave

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This week is set to be a scorcher for the UK, with a heatwave already bringing temperatures of 30 degrees in some parts of London on Monday. This week’s Forum Spotlight is all about keeping tenants cool when the mercury starts to rise. A landlord posted in our Forum a question about providing his tenants […]

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