Landlord confidence bounces back after lockdown

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The proportion of buy-to-let landlords intending to buy additional properties over the next 12 months has risen to a four-year high.

The proportion of landlords willing to invest in new properties over the next 12 months has risen to 17%, the latest research from research consultancy BVA BDRC and BM Solutions, which covers the second quarter of this year. 

This is an increase of 5% and stands at the highest level recorded over the last four years.  

This increase in landlord confidence indicates tentative steps towards a post-lockdown bounce back in the buy-to-let sector.  

According to the research, only one in five landlords is anticipating a ‘significant’ negative impact as a result of Covid-19 and tenant demand in Q2 is up in most areas of the UK.  

Central and outer London were the only areas in which tenant demand was down on Q1, while the South East and the North East showed strong growth. These findings may reflect the changing patterns of commuter behaviour as more people look to live outside the capital and increasingly work from home.  

BM Solutions Head Phil Rickards says: “This optimism is an early indicator of the resilience that we have seen in the private rental sector in the past, and the industry continues to work hard behind the scenes to support the market through these challenging times. 

“The latest survey from BVA BDRC and BM Solutions has highlighted a broader feeling of positivity in terms of outlook from landlords with only one in five anticipating a ‘significant’ negative impact as a result of Covid-19.  

“Landlords are also seeing their profitability remaining strong with 87% generating a profit – the highest level of profitability recorded since the end of 2018.” 

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Positive signs for growth as landlords’ confidence improves

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According to property investor lending specialists BM solutions, there is increasing evidence that more landlords are looking to expand their portfolios than there are those looking to sell.

While at least 70% of landlords expect their lettings businesses to be hit by the Covid-19 lockdown and the pandemic’s associated problems, this figure is quite a bit less than it was in the first quarter of this year, that’s according to research carried out by BM.

There are definite signs of a national trend of a bounce back from the initial fears the lockdown brought, but with London itself being the only location in the country still showing notable signs of pessimism, that’s according to BM’s data.

The proportion of landlords intending to buy over the next 12 months has jumped from 5% to 17%, that’s the highest level recorded for around four years.

This may be explained by landlord confidence in rental yields and their own lettings business improving, the fact that interest rates for alternative savings investments is almost zero, and there’s the existential threat of a return to inflation after the crisis is over.

Almost 90% over the landlords surveyed by BM reported making a profit, reflecting the highest level of profitability recorded since the end of 2018. Central and outer London were the only areas where tenant demand dropped from Q1, while the South East, North East, Midlands and North West grew strongly.

These trends illustrate the much-reported trend brought about by the need for home-working, leading to an escape from the capital and commuters looking to move to somewhere with outside space, office space and away from the capital.

Three-quarters of Central London landlords have reported reduced tenant demand which represents the biggest demand drop in the country as a result of Covid-19. This will inevitably result in reduced rents, reduced revenue and a negative impact on those London landlords’ future intentions.

Research from Hamptons International backs-up the theme, showing that London-based buy-to-let landlords are increasingly heading to the North West in search of better returns, with around one-third (34%) of London-based investors buying new property in the past year bought in the Midlands and North, up from just 14% in 2015 and 4% in 2010.

The stamp duty surcharge, high London prices, and now the drop in demand is forcing landlords with properties in the capital to look elsewhere. City investors have been looking at property in the North West in the university cities where yields as high as 8 to13% have been achievable. In Liverpool, for example, it is possible for investors to acquire a good quality three-bed, fully let HMO near a university for around £130,000.

Meanwhile, overall the number of prospective tenants has continued to rise, with the average ARLA propertymark branch registering 79 new tenants in June compared to 70 on average in May. Year-on-year, the figure is the highest ever recorded for the month of June, that’s according to the latest Private Rented Sector report by ARLA Propertymark.

The ARLA propertymark figures show that the number of tenants experiencing rent rises increased in June, with 29% of agents witnessing landlords increasing rent compared to just 14% in May, and the average time properties were vacant between tenancies decreased to four weeks in June from five weeks during May.

BM Solutions head Phil Rickards has said:

“Inevitably the past few months have been unsettling and uncertain for landlords and this is reflected in sentiment and profitability as landlords still expect to be negatively impacted by the pandemic.”

Phil Keddie, president at ARLA Propertymark, has said:

“Our latest figures show that the rental market is continuing to pick up following the COVID-19 lockdown. The record-breaking supply of rental stock and demand from tenants for this time of year paints an optimistic picture for the summer months, indicating that the market will be more active than the usual seasonal lull. As the market continues to recover from the pandemic, it’s essential that everyone continues to keep up with their rent in order to sustain the market and help boost the economy during these uncertain times.”

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Grounds For Possession – Section 8

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Grounds for Possession – Assured Shorthold Tenancies

The Housing Act 1988 as amended by the Housing Act 1996 lays down certain circumstances (grounds) under which a landlord may successfully apply to court for possession.

The grounds for possession fall into two categories: mandatory, where the tenant will definitely be ordered to leave if the landlord can prove breach of contract, and discretionary, where the court can decide one way or the other.

These grounds for possession apply to tenancies entered into after 15 January 1989. The terms of your tenancy agreement must make provision for termination on these grounds.

These guidelines are based on English law and are not a definitive interpretation of the law, every case is different and only a court can decide, so if in doubt seek expert advice.

Mandatory Grounds for Possession:

Ground 1 – This ground can be used where a landlord (or his spouse) has occupied the dwelling as his only or principle home at some time, and having given notice of his intention to return, now wishes to do so. Successors in title may also use this ground provided they did not purchase the dwelling.

Ground 2 – This ground is used by a mortgage wishing to gain vacant possession in order to exercise a power of sale. Notice will need to have been given to the tenant. The mortgage must have been taken out before the tenancy began and the the tenant warned about this contingency within the tenancy agreement.

Ground 3 – This ground applies to premises which within the last 12 months have been the used as holiday lets and have currently been let on a fixed term of up to 8 months, usually for the winter period. Notice must have been served that the property is to be returned to holiday let use, usually for the summer period.

Ground 4 – This ground applies to student accommodation owned by educational institutions. Whilst students are normally licensees, this ground applies where the institution has let for a fixed term of up to 12 months.

Ground 5 – This ground applies to properties owned by religious bodies, where, for example, the property was occupied by one of their ministers and is now required for another.

Ground 6 – This ground is similar to one established in commercial leases (Landlord and Tenant Act 1954) where recovery of possession is allowed where a landlord wishes to demolished or substantial reconstruct or redevelop the building.

Ground 7 – This ground concerns inherited or succession rights rights to a tenancy. It allows the landlord to claim possession where proceedings are started within one-year of the tenant’s death (or later if the court allows) irrespective of whether rent was accepted or not. The ground cannot be used against a surviving spouse.

Ground 8 – This ground has been changed by the Housing Act 1996 and concerns arrears of rent. Arrears must exceed 8 weeks if the rent is paid weekly or fortnightly, 2 months if paid monthly, one full quarter if paid quarterly or 3 months if paid yearly. The maximum arrears in each case must exist both at the notice of proceedings and at the hearing itself. The ground must be clearly stated so that the tenant knows what he is responding to.

Discretionary Grounds for Possession:

Ground 9 – The landlord seeks possession because he has offered the tenant suitable alternative accommodation. The tenancy must be on the same basis, for example if the old one was furnished, the new one must be, and the landlord can be asked for removal expenses. If the tenant contests it is often on the basis of what is suitable alternative accommodation.

Ground 10 – This ground covers arrears of rent being in arrears less than the times specified in mandatory ground 8. This ground also, with the consent of the court, allows rent recover by distress.

Ground 11 – This ground covers persistent delays in rent payment. However, being a discretionary ground the court will take into account factors outside the tenant’s control, for example, delays in housing benefit payments

Ground 12 – This ground covers tenant’s in breach of their contractual (lease or tenancy) agreement conditions, other than rent payments.

Ground 13 – This ground covers waste, neglect or default concerning damage to the tenant’s accommodation or common parts. This ground also covers the acts of sub-tenants, lodgers, tenants family or visitors.

Ground 14 – The landlord can seek possession where a tenant, sub-tenant, lodger or visitor is causing a nuisance to neighbours or is using the property for illegal or immoral purposes. The ground also covers cases of domestic violence where one partner has left and is unlikely to return.

Ground 15 – This ground covers cases where landlord’s furniture has been ill-treated.

Ground 16 – This ground covers cases where the tenant was an employee of the landlord and has since left his employ. This case is rarely used as most resident employees are licensees and therefore not covered by the housing acts.

Ground 17 – This final ground was introduced by the Housing Act 1996 and covers cases where the tenancy has been created as a result of a false statement knowingly having been made by the tenant or someone acting on his behalf. It is worth noting here the importance of a Tenancy Application which seeks factual information from the tenant.

There is also one other overriding reason for seeking possession, and that is where it can clearly been shown that the tenant is no longer using the accommodation as his principal home.

All claims for possession during the fixed term must be preceded by correctly serving a Section 8 Notice.

Claims for Rent Arrears

For Rent Arrears, perhaps the most common claim, the landlord relies on either one or a combination of grounds 8, 10 and 11.

• Ground 8 – the tenant owes at least two months’ rent (monthly tenancy) when the notice was served and at the date of the court hearing. Where rent is payable weekly, quarterly or yearly this ground requires that there are rent arrears of eight weeks, three months and six months respectively.
• Ground 10: the rent was overdue when the landlord served notice and when he began court proceedings
• Ground 11: the tenant has been persistently late in paying his rent.

Periods of Notice Required – Serving a Section 8 Notice

You must serve notice seeking possession of the property on the tenant before starting court proceedings. You need to give the following periods of notice :

Grounds 3, 4, 8, 10, 11, 12, 13, 15 or 17 – at least 2 weeks

Grounds 1, 2, 5, 6, 7, 9 and 16 – at least 2 months

For ground 14 – you can start proceedings as soon as you have served notice.

Where the tenancy is a contractual periodic or statutory periodic tenancy, the notice must end on the last day of a tenancy period.

Serving Notices Seeking Possession

Section 8 and section 21 notices can be served in person or by mail.  Courts will accept proof of postage or a recorded delivery as proof of delivery on the day, though it’s advisable to allow sufficient time to arrive.

If served in person, ideally this should be witnessed. Personal service is preferable, with proof of postage being the next option recommended. Sometimes respondents refuse to accept and sign for recorded delivery letters which causes delay.

County Court – Claims for Possession Procedures

To gain possession of the property the landlord will need to complete the Form for Possession of Property N5 Formand the Particulars of Claim N119. If you also want to claim rent arrears you can provide details on the particulars of claim form.

You should send or take your completed forms to the county court office in the district where the rental property is located. Once your completed forms are received at the court office, your case will be allocated a hearing date. For guidance, you should read the notes for claimant (rented residential premises) on the Court Service web site.

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How Has COVID-19 Affected the Construction Industry?

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The year 2020 has seen significant disruptions to how many operate around the globe – from when we’re allowed to leave our homes to the way major projects across a variety of industries are executed. Amongst these, the world of construction has experienced major disruptions, with lockdown and social distancing measures causing issues for an array of different building projects. 

To say the least, it has been a particularly frustrating and unnerving time for those in construction. However, whilst COVID-19 has certainly been a major cause for concern, it is by no means the end for building development in 2020.  

As people begin to reflect on their time in lockdown, and the global pandemic as a whole, a question bound to cross the minds of many in construction is what measures have been put in place to support the industry through this turbulent time?  

Responding to the Crisis 

One of the key ways of responding to the crisis that can be seen across all different types of industries is stringent hygiene practices to help slow the spread of the virus. This has included social distancing measures, making face masks mandatory in certain areas, as well as encouraging frequent use of hand sanitizer. 

The response from the construction industry is no different to this, industry bodies such as Build UK and the Civil Engineering Contractors Association having started to offer support to those who have been affected, whilst also implementing health and safety measures that are vital during the current global health crisis – splitting up teams, having meetings online where possible and providing extensive on-site hygiene facilities. 

Chris Griggs, Director of Griggs Homes commented in light of the situation: “Our site teams have shown the upmost professionalism throughout these challenging times. All of our staff, suppliers and sub-contractors have been extremely careful to ensure they are following the latest government guidelines.” 

“We will continue to place a strong emphasis on safety as we adjust to a new ‘normal’ and a new way of working. We are making fantastic progress across all of our bespoke client projects and our development sites.” 

Looking to the Future   

Looking out to the future of construction, particularly in the UK, plans are being developed to not only help push for more construction projects, but furthermore to increase the amount of council, social and other affordable types of housing – something that Sadiq Khan himself claims are “so desperately” needed, particularly throughout London.  

The recently published report of the COVID-19 Housing Delivery Taskforce states: 

“London went into lockdown with a strong record on building social and genuinely affordable homes. Last year, more than 17,000 new genuinely affordable homes were started with support from the Mayor of London, more than at any time since records began in 2003, and more than 3,300 new council homes, the most in any year since 1985.” 

“We cannot be complacent. It is vital that we maintain this momentum, and work in partnership with all involved so that we can continue to tackle the underlying socioeconomic problems exposed by the pandemic. The housing market we had before did not work for most Londoners, and Covid-19 presents an opportunity to rebuild a model which works better for all. To coordinate our efforts in London, I brought together representatives from the capital’s councils, housing associations, the development and construction industries, and unions, to form a Covid-19 Housing Delivery Taskforce.” 

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Gifting his own residential property to his son via his brother?

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A friend wants to gift his own residential property to his son and move into a property he has been renting out. The son, however, has some issues and is not willing to accept the gift of the property for the time being.

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Are courts are going to turn vehemently anti-landlord?

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Some tenants left a landlord’s property a year ago with nearly £2,000 in arrears.  The court awarded the £2,000 to the landlord, but the landlord was then asked to go to mediation to come to an agreement about payment.

The mediation followed the usual pattern.

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SPOTLIGHT: Rent arrears surged by a fifth during Covid lockdown…and worse is to come

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The average tenant in arrears owed almost a fifth more in May than they did in January, according to analysis published by PayProp, a leading rental payment automation platform.

And as we move towards the end of the Government’s furlough scheme at the end of October, landlords should prepare themselves for further increases in rent arrears as redundancies rise, it warns.

Even before the Government’s Job Retention Scheme comes to an end, the proposed changes to the furlough system are likely to put extra pressure on tenants’ finances.

From 1st August, employers will be once again required to make National Insurance and pension payments for furloughed workers, which may well result in a spike of redundancies if bosses are unable to afford these additional costs.

And from 1st September, employers will have to contribute 10% of the wages of furloughed staff, rising to 20% in October before the scheme is wrapped up at the end of October.

In addition, some employees may already be feeling the pinch as commuting costs re-emerge and the option to spend in pubs and restaurants is an option once again.

Neil Cobbold, Chief Sales Officer at PayProp, says: “The job retention scheme has helped to keep people employed and subsequently allowed many tenants to continue paying rent, but as it starts to wind down, letting agents and landlords should prepare for more tenants to fall behind on rent.

“Or, in the worst case scenario, not be able to pay at all.”

Read more about rent arrears.

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