Construction of build-to-rent properties rises over past 12 months

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New data provided by the National House Building Council (NHBC) reveals that the build-to-rent (BTR) sector in the UK is expanding rapidly, with the construction rate of BTR flats increasing by 57 per cent over the past 12 months.

The recent data shows a big difference from previous years.
In 2015, when the figures were first recorded, only 1257 BTR apartments were built,
and this number dropped the following year. NHBC’s new figures show that just
under 4800 units were developed in 2019, the biggest increase in BTR
construction yet.

The NHBC report can be read in full here.

Some believe that this could be indicative of a significant
change to renting in the UK. But what does it mean for landlords?

Does the rise of BTR
present a risk to private landlords?

The increasing popularity of BTR has brought some changes to
expectations within the rental sector. For example, many BTR developments offer
additional services, modern furnishings and appliances, long-term leases, and
shared on-site facilities such as gyms, laundry rooms, and even restaurants.
These types of services and facilities are very appealing to renters who may be
renting long-term.

Since it is difficult, or even impossible, for private
landlords to provide these types of services, does BTR pose a serious threat to
private landlords?

Not necessarily. A potential drawback for BTR is that it is
often considerably more expensive for tenants than other rental options. A
study by real estate services company, JLL, found that BTR flats were, on
average, 11
per cent more expensive than other types of rental properties in
their respective areas. Another
study found that BTR properties were 10 per cent more expensive than
similar private rental properties.

What type of tenant
does BTR target?

It is often thought that BTR properties target young and
single professionals. But this is not necessarily the case: 35-49 year olds
make up the majority of the UK rental market, and BTR developers are tailoring
their properties and services to accommodate young families, as well as young
professionals. For example, some complexes offer three and four bedroom
apartments with long-term contracts.

Eddie Hooker, CEO of Hamilton Fraser, commented: “I expect development schemes will start to evolve to
include lower income tenants. The student market for example has shown that
‘lifestyle’ blocks are becoming more attractive even for the lower income
students.”

“Larger blocks or schemes
can include a range of units that will be attractive to differing income tenants
but retaining the benefits of shared services and lifestyle options. The market
is evolving.”

Hamilton Fraser’s guide, ‘What
does build to rent mean for buy to let?’, explores the possibilities
of BTR and the effects it is having on the industry.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Construction of build-to-rent properties rises over past 12 months | LandlordZONE.

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Airbnb unveils ‘party detection’ monitors aimed at UK landlords

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Trialled in Edinburgh, the devices listen for potential party activity by monitoring sustained excessive noise, heat and humidity, but have been criticised by privacy campaigners.

Airbnb has rolled out tech
to help landlords detect parties being held within properties and prevent the
damage, anti-social behaviour and complaints from neighbours that they can
cause.

The short-let platform’s
website has launched a separate section offering landlords three discounted
listening devices that can alert landlords to rowdy behaviour within their
properties, two of which are available to UK Airbnb ‘hosts’.

This follows a trial of the
devices in Edinburgh, where party houses have become a significant problem.

Airbnb is keen that
landlords embrace the kit and is offering one, called Roomonitor, for £30
despite a normal retail price of £126.  A
second device, called Minut, is being offered for £76 compared to a normal RRP
price of £115.

The makers of both devices
strenuously reassure landlords that guest privacy is guaranteed. But the more
expensive of the two, Minut, monitors much more than noise including temperature, motion and humidity.

All three devices have
received a poor welcome from both personal privacy campaigners and the press.
The Daily Mail this morning described the devices as ‘creepy’.

Party noise

But both bits of tech
claim not to record sounds but rather sustained noise levels above 70 decibels,
although privacy groups claim landlords in traditional rental properties, or
hotel owners, would be unlikely to get away with fitting such devices.

Airbnb says potential
guests must be warned that devices such as Roomonitor and Minut have been
fitted to an Airbnb and include this in their ‘host rules’ section.

These devices are not new; several UK security companies offer listening devices to landlords. But the law is varied and largely non-specific about listening devices like these. Unlike in the US, there is specific law on surveillance within rented properties, and regulations are instead covered by the very general provisions of the Human Rights Act, which offers anyone a ‘reasonable expectation of privacy’ in their lives unless they are involved in illegal activity, and then only authorised organisation are allowed to fit them.

Visit the Airbnb ‘party prevention’ page.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Airbnb unveils ‘party detection’ monitors aimed at UK landlords | LandlordZONE.

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One in four properties are listed on Airbnb in some areas, claims new research

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Airbnb claims research is flawed because it does not separate out the number of listings from the level bookings – which it says are very different things.

In the latest round of Airbnb bashing, research released
over the weekend shows many parts of the country have one listing on the
platform for every four properties.

Airbnb is under media scrutiny again with fresh warnings
that the rapid expansion of short-term lets is being made at the expense of the
private rented sector, depriving locals of homes.

Using data gathering firm Inside Airbnb, The Guardian newspaper identified hotspots in both rural areas and
inner-cities, with the highest incidence of Airbnbs in Edinburgh Old Town,
where there were 29 active listings for every 100 properties.

In England, Woolacombe, Georgham and Croyde, in Devon had
the highest rate of Airbnb lets, with 23 listings for every 100 properties.

The newspaper cross-referenced a database of more than
250,000 Airbnb active listings with government housing stock figures to
calculate the ‘penetration rate’ of Airbnbs in 8,000 areas across England,
Wales and Scotland. Across the whole of Great Britain, there were 0.8 Airbnb
listings for every 100 homes.

The dataset covers entire homes, private rooms and shared
rooms, although two-thirds of active listings (67%) are for entire apartments.

Airbnb says the findings are based on “unreliable scraped
data and flawed methodology”, emphasising that unusual listings such as
caravans or large manor houses, used for events, might not affect the local
housing stock.

It says some listings might be booked for only a few
nights a year. The company is nearing the end of a nationwide roadshow to find
a way to make it easier for local authorities to enforce existing legislation.

Earlier this month, City Hall
used the same data firm to reveal that hosts with multiple properties are behind at
least one-third of Airbnbs listed in the capital. It found the number of Airbnb
listings in London had quadrupled in the last four years.Read
the Guardian article.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – One in four properties are listed on Airbnb in some areas, claims new research | LandlordZONE.

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Investing in Venture Capital Trusts to remove my CGT liability?

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I have just sold a rental property and will be liable for Capital Gains Tax after taking in to account the various tax breaks.

I understand the rate payable will be 18% or 28% depending on my other total income.

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RLA writes to Ministry of Housing over electrical safety loophole

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New regulations raise the prospect of the highest risk rental properties not being covered by a legally binding electrical safety regime for a prolonged period of time.

The changes, due to come into force from June this year

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Electrical safety rules will leave tenants at risk

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New electrical safety rules could leave tenants in high-risk rental homes vulnerable. The regulations are due to come into force from June this year and will immediately remove the obligation for landlords to carry out electrical safety checks in Houses of Multiple Occupation (HMOs).  The electrical safety obligation under the new rules will not apply until […]

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Break Clauses in Commercial Leases

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Lease Agreements:

Landlords of
residential properties have become used to the “rules of the game”
being largely governed by statute, that is laws laid down by
Parliament. They govern the relationship between landlord and tenant
much to the exclusion of express custom clauses drawn up by the
landlord and set-out in the tenancy agreement.

Many of the clauses in residential agreements are pretty standard, indeed the government now provides a model tenancy agreement that all landlords can use free of charge. It has clauses that reflect the Housing Acts, even when not expressly included, as some rules are implied. Yes, there is some flexibility whereby landlords can include their own rules by way of custom clauses, but they can only be enforced if a court deems them “reasonable.”

However, with a commercial lease things are somewhat different. Yes, there are some over-riding common law and statutory principles that lease clauses must adhere to, but in the main the agreement is based on contract law whereby the parties make and agree their own rules. It contrasts somewhat with the consumer law influence now attached to a residential tenancy.

This article is based on English law and is not a definitive statement or interpretation of the law; rules change and every case is different – only a court can decide. Other jurisdictions are similar but there are important differences. Always seek expert advice before making or not making decision.

A case that illustrates this point very well involved a dispute between commercial tenant Marks & Spencer and landlord BNP Paribas (Marks and Spencer pic v BNP Paribas Securities Services Trust Company (Jersey) Ltd), a case which in 2015 ended up at the Supreme Court, having previously gone through the Court of Appeal.

M&S had rented
retail space off the landlord on a lease which included a conditional
tenant’s only break clause. The conditions to exercise the break
were that (1) six months’ notice was to be given, (2) a break
premium was to be paid, and (3) there were to be no rent arrears at
the time the break notice was served.

The dispute between
the parties arose because the break itself was out of sync with a
quarter’s rent paid in advance, which meant two months’ rent was
paid for a period after the tenant had gone.

In all the respects
the conditions of the break were met in full, the six month’s
notice served, the break premium of £919,800 + VAT paid, and there
were no rent arrears, indeed the converse was true – rent was
overpaid.

The difficulty for
the tenant was that there was no express clause in the lease either
stating what would happen in the case of a rent overpayment, and
nothing to align the break with the end of a quarter, but the tenant
wanted the overpaid rent to be returned.

The initial court
case involved a claim for the “overpaid” rent on the basis that
the court should imply such a term in the lease; after all, on the
face of it logic would seem to imply that any overpayment should be
refunded.

The Court found in
favour of M&S, and as the tenant requested, implied a repayment
clause even though no express clause existed. BNP Paribas appealed
the decision and it was overturned by the Court of Appeal. M&S
then pursued the matter through to the Supreme Court, the final
arbiter, and lost its case, and its refund.

What are the
lessons for property investors?

The main principle
to remember is that business leases are basically contractual
agreements based on negotiations between the parties and the courts
will enforce them as such. Courts do not like to imply terms in
commercial leases unless there are exceptional circumstances.

In giving judgement,
the Supreme Court stated that “a term will only be implied if it
satisfies the test of business necessity or is so obvious that it
goes without saying.” It was determined by the Supreme Court
that the absence of a repayment clause in the lease was not a
“business necessity” or a “practical absurdity”
and accordingly it ruled that a repayment clause should not be
implied by the Court. These were matters that should have been dealt
with by the parties when negotiating the contract according, to the
judges.

The ruling is an
important one because it lends a good degree of certainty for
commercial landlords regarding the position of the parties regarding
the repayment of rent following a break. The Court was concerned that
if had it found in favour of the tenant in this case, then numerous
further disputes might arise alone similar lines where matters were
not expressly dealt with in the lease.

On the face of it
the decision could be construed as overly “landlord friendly” and
against logic; a harsh decision on the tenant when it had paid for a
period it was unable to use. This was the case even though it had
paid a substantial break premium. But it was stymied simply because
the date of the break did not align with a quarter day and there was
no specific repayment clause.

However, the Court
took into consideration that a tenant-only break clause was
potentially of considerable commercial value to the tenant, and
therefore deemed it fair that the landlord should not be obliged to
repay the two-months’ rent when it was the tenant’s decision to
break the lease.

This Supreme Court decision stands and it is an important principle for property investors and for assignees to bear in mind; that whatever the lease says binds the parties, and usually what it does not say, doesn’t. It’s important to check lease break clauses carefully when purchasing a commercial building with an existing tenant, or taking on an existing lease.

Break Clauses in Residential & Commercial Leases

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Nottingham Council won’t refund my licensing fee

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The Nottingham Selective Licensing Fee is £780.00 for 5 years. I paid £460 in October 2018 and was due to pay the final £320.00 in 2021, but after 15 months I sold my property (tenant in huge arrears, UC messed up payments).

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Fitness for Human Habitation Act extension-one month to go

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On 20th March 2020 the Homes (Fitness for Human Habitation) Act will be extended to apply to existing tenancies in England. The law was introduced in March last year, to ensure rented homes are safe and secure-with tenants given the power to take their landlord to court if this is not the case. Tenants who […]

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Breaking: UK’s biggest estate agency companies in talks to merge

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Any deal will be scrutinised carefully by the competition regulator because landlords would face less choice when choosing a lettings agency to manage their properties.

The UK’s two largest estate agents, who between them have tens of thousands of landlord clients, are in talks to merge.
Countrywide and LSL have confirmed this morning that they are in discussions to merge the two businesses following media reports over the weekend.

Neither company is a household name but both operate many of the UK’s best-known estate agencies including Your Move, Reeds Rains, Bairstow Eves, Mann, Hamptons International, John D Wood and Marsh & Parsons.

If the two companies were to successfully merge, it would create a property industry behemoth that would, overnight, become the country’s largest lettings agency and employ over 14,000 people.

But such a powerful and dominant player would give competition regulators serious pause for thought, and it is guaranteed that the deal will be scrutinised by the Competition and Markets Authority (CMA); the two companies compete in many towns and cities across the UK with their different brands.

Landlords would therefore have less choice, it would be argued, when picking a lettings agency.

The merger follows difficult times for the two companies, both of which are listed on the London Stock Exchange.

Countrywide has endured a torrid few years during which it has battled mounting losses and ejected its CEO following a string of terrible financial results, while LSL last year executed a brutal cull of branches, keeping only the profitable and best-performing offices and merging, closing or selling off the remainder.

Both have suffered as the UK property market has been battered by consumer worries following the EU Referendum in 2016 and also a contraction of the buy-to-let market following government cuts to landlord tax relief, increasing regulation of the private rented market and the tenant fees ban.

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