BREAKING: Thousands of landlords released from ‘cladding hell’ after EWS1 forms scrapped

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Landlords who own leasehold properties in low and medium-rise apartment blocks affected by the cladding scandal will no longer have to supply an EWS1 form when selling or remortgaging their properties, the government has announced.

Thousands of landlords who have been unable to sell or re-finance their properties following the Grenfell tragedy will now be unlocked after an official report commissioned by the housing secretary Robert Jenrick tasked with looking at medium and lower-rise apartment blocks reported that there is ‘no systemic risk of fire in these blocks of flats’.

Jenrick says he is now working with lenders to ensure they don’t require the controversial EWS1 cladding forms when dealing with leaseholders wishing to sell or re-mortgage their properties.

Landlords seeking to sell up will also have a larger pool of buyers interested in their properties as the new rules will apply to those buying flats in these blocks too.

“Today’s announcement is a significant step forward for leaseholders in medium and lower-rise buildings who have faced difficulty in selling, anxiety at the potential cost of remediation and concern at the safety of their homes,” says Jenrick.

“While we are strengthening the overall regulatory system, leaseholders cannot remain stuck in homes they cannot sell because of excessive industry caution, nor should they feel that they are living in homes that are unsafe, when the evidence demonstrates otherwise.”

Key lenders

Three key high street lenders have already signed up to stop requiring EWS1 forms including HSBC, Barclays and Lloyds with others expected to follow.

But property management giant Ringley has warned that, although this is the ‘right decision’, many leaseholders have spent huge sums paying surveyors to produce the EWS1 forms they were told were needed.

“The question now is who will compensate them, and of course, what is to be done about those living in buildings 18 metres or higher,” says MD Mary-Anne Bowring.

Read more: Landlord reveals nightmare of being caught up in building safety scandal

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Businessman fined over car repair garage turned into ‘atrocious’ slum HMO

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A businessman has been fined for housing tenants in appalling conditions without windows, hot water or fire safety measures at his premises.

49-year-old Mehmet Gurcuoglu, director of Golden Motors on Andre Street in Hackney Downs (pictured), used a dilapidated outbuilding at the railway arch car wash and tyre workshop where tyres were stored up to the ceiling next to beds and blocked escape routes.

He admitted operating an HMO without a licence and to five breaches of management regulations and was fined £8,992 at Thames Magistrates Court.

The court heard that as well as being flammable, the tyres would have filled the escape route with toxic gases if they had caught fire, while the one battery operated smoke alarm had been covered up with plastic sheeting.

Police raid

Council officers joined police on a raid of the property in 2019 where they discovered four people living, probably with a young child.

Councillor Sem Moema, mayoral adviser for private renting and housing affordability (pictured), described it as one of the most atrocious cases officers in the borough had ever seen.

She says: “While this is an extreme example of criminal behaviour, it’s also a symptom of the wider housing shortage and a poorly regulated private rented sector that encourages landlords to let out poor quality homes at often extortionate rents.

“Our crackdown shows that we’ll take whatever action we can to tackle those who don’t play by the rules while we continue our campaign for better renting and a fairer system for tenants.”

Earlier this year, rogue landlords who illegally let a Clapton property without providing proper washing facilities or tackling serious fire hazards were fined £22,000 after a Hackney Council prosecution.

Read more: Minister reveals true number of rogue landlords on ‘pointless’ national database

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US private equity swooping on undervalued UK building companies

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With U.K. house prices soaring during the pandemic, share prices in the markets were hit and have remained largely depressed due to reduced profits. It was a signal to US investors who saw two quoted UK building companies with exceptional prospects trading at low valuations – perhaps too tempting to resist.

The US funds are simply doing what they do best, snapping up bargains when prices are low, when future prospects are good, and then selling on a high.

According to the Wall Street Journal, UK home sales prices last month were 13.4% higher than they were in June 2020, a figure sourced from the House Price Index published by the Nationwide Building Society, one of Britain’s biggest mortgage lenders. It’s the strongest annual house price growth since 2004. It means the average house price is now almost £250,000.

NAEA Propertymark says there is a severe shortage of housing stock for sale, meaning that there are currently 16 potential home buyers for every property on the market.

In January the Lone Star Real Estate Fund, of Dallas, Texas, acquired the well established retirement home builder McCarthy and Stone for £647 million, or £1.20 a share. The company’s shares had previously been trading above £1.50 just before the pandemic hit.

And since then the Blackstone Group Inc., another mega US fund specialising in real estate, is in the process of finalizing a deal to buy St. Modwen Properties PLC, a FTSE 250 constituent house builder and logistics company. The price agreed is £1.25 billion.

According to St. Modwen’s latest annual report, the house builder, which also rents commercial property, made a pre-tax loss of £139m in 2020, down from a £59m pre-tax profit in the previous year.

Raul Cimesa, head of London new homes at real-estate agent Knight Frank told the WSJ:

“The [UK] real-estate market just goes on growing and growing.”

Despite property prices rising inexorably, many UK home builders have seen their share prices decline during the pandemic. Construction sites and estate agents had to close during the first lockdown, and have only opened up slowly since.

Ben Babington of Trilogy Land & New Homes told the Journal that these U.S. investment firms are taking advantage of the large discount these companies are trading at and what they see as the disconnect between this and their real value. They are targeting the home sales market in London’s suburbs and regional towns and cities, he says.

“I am sure investors are seeing really good value in investing in housing at the moment. Share prices have taken a bit of a battering during the crisis,” Babington said.

James Seppala, head of Blackstone Real Estate Europe, has said that St. Modwen will be given “significant additional capital” to expand its output, mainly in the family homes market in and around regional towns and cities.

St. Modwen is a company that owns a property portfolio valued at some £1.37 billion and sold 948 homes in 2020. But the couple of months of closure in 2020 during the spring lockdown lost the company a significant amount of its production for the year, while it’s rental income also took a hit, throwing it into a pre-tax loss at the financial year end last November.

Also helping these US investors is the weakness of Sterling. At less than $1.40 to the pound, the currency is well below what it was just five years ago, at around $1.80 to $1.90.

Real-estate agents, Savills, forecasts show that prices are set to keep on growing albeit perhaps at a slower pace than now once the Stamp Duty holiday finally comes to an end in September. The firm expects prices will grow by 21.1% between now and 2025.

Other US investors have either invested in UK already or are eyeing prospects. US property investors are also interested in the UK rental market in the form of large managed apartment blocks.

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MP says landlords, tenants and government must ‘shoulder cost’ of rent arrears

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Conservative MP Nigel Mills has suggested that the burden of shouldering spiralling rent debt should be shared three ways between tenants, landlords and the government.

A member of the Work and Pensions Committee, Mills (pictured main image, bottom right) believes tenants can’t be expected to clear their debts without help, which would end up with them being evicted, losing their deposit and struggling to get another tenancy. Instead, landlords could agree to waive a third of the arrears, tenants would pay back a third and the tax payer would pay a third.

“The government should step in and say it’s nobody’s fault,” says Mills. “Tenants will need to pay some of their debt, but in return a landlord could offer a new one-year lease so the tenancy can be sustained and the arrears could be cleared over a decent period, in return for a taxpayer contribution. Those proportions could be moved up or down but that seems to be a realistic model.”

He made the suggestion while taking part in an NRLA webinar on tackling Covid-related rent arrears along with Yvonne Fovargue, Labour chair of the All-Party Group for Debt and Personal Finance, and Chris Norris, policy director at the National Residential Landlords Association.

Arrears triple

Government data shows that in England, since the start of lockdown measures last March, the proportion of private sector tenants in rent arrears has tripled.

Norris says that landlords are not asking the government to bail people out, but for enough support to let people help themselves. He adds: “If we can continue to work together towards that kind of targeted financial package and solution we all want to find, there’s an awful lot that can be done to work our way out of this.”

The NRLA will now submit a report based on the webinar to the Chancellor, the Housing Secretary and the Prime Minister’s Office.

Watch the webinar for free.

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CLADDING LATEST: Crisis sparks political unrest in Tory heartland

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The government’s failure to fully support leaseholders affected by the cladding crisis has sparked revolt in the Tory heartlands where local councillors have urged Housing Minister Robert Jenrick to do more to help.

Basingstoke and Deane Borough Council passed a motion earlier this year saying leaseholders including many buy-to-let landlords should not be forced to pick up the bill for any cladding-related work.

Tristan Robinson, the Conservative councillor with responsibility for homes and regeneration (pictured, above), has now told the minister how current government measures have not reduced the financial burden on owners in the town where seven high-rise apartment blocks recently failed cladding checks.

Unacceptable

In his letter, Robinson said: “It is the council’s view that the current situation is unacceptable and that the costs associated with remedial action for fire safety should be met by the building owner and not by residents whom purchased, or rent their properties in good faith.

“The current funding schemes comprising of the waking watch fund and the building safety fund certainly reduce the financial burden on leaseholders but crucially they have not reduced this burden altogether.”

He urged the government to consider making further funding available for those not covered by existing schemes. Robinson added: “In many cases residents are not only facing significant increased costs, but are also unable to sell their properties until the buildings are fully remediated.”

The waking watch fund pays for the cost of a new fire alarm to remove the costly 24/7 fire patrols, but does not cover the patrols themselves, while the building safety fund only supports the removal of unsafe non-ACM cladding system on residential buildings 18 metres and over.

Council comment

“These collective terms were simply used to refer to whoever incurs costs in terms of paying for waking watches and/or any fire safety remedial works which are needed,” a council spokesperson tells LandlordZONE.

“The council’s view is that these costs should not be borne by individual leaseholders (including landlords) or residents, and that such costs should either be covered by government grants or the ultimate freeholder of the building.”

Read more: Our interview with landlord caught up in cladding crisis.

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LATEST: Judge gives key ruling on ‘shared property’ rental deposits

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London’s County Court has set a worrying precedent for landlords who operate properties that are rented ‘jointly and severally’ but where, over the years, tenants have been left to sort out their own deposits as tenants come and go.

The judgement by Judge Luba QC concerns landlord Richard Boddy who bought a property in Maida Vale, London (pictured) in 2003 as his home.

He later moved out and rented the three-bedroom flat as a ‘house share’ with the tenants jointly and severally responsible for paying the rent and bills.

This arrangement continued via three ‘churns’ of tenants until Covid struck, whereupon it fell apart after one tenant packed her bags and returned to Australia, requesting that her deposit cover any cleaning charges and unpaid rent.

Damages

At this point the remaining tenants sought damages arising from the non-protection of their deposits, arguing that a new tenancy should have been issued by the landlord at each ‘churn’ and that, therefore, their deposits should have been protected.

At a hearing earlier this year the judge dismissed their claims agreeing with the landlord that they were licencees and not tenants and therefore, because they did not have ASTs, the deposit did not need to be protected.

But the tenants, who still live at the property, took the case to appeal and have now won.

Judge Luba (pictured) agreed with them that each ‘churn’ was in effect a new tenancy and that their deposits should have been updated and protected afresh.

Read the full judgement.

He was also somewhat poetic in his judgement, highlighting how the only evidence of the original tenants was their unclaimed and ‘dog eared’ post festering in the hallway.

Boddy must pay £3,615 which is £1,205 in respect of each of the three churns which produced a new tenancy to which they were in turn either or both parties to.

Luba gave the lightest penalty he could to the Boddy as he felt that the landlord had not purposefully tried to dodge his deposit protection obligations.

The judgement affects other areas of PRS law, in particular evictions; one of the many reasons tenants can avoid eviction is if a deposit has not been properly lodged with an approved scheme, although landlords can return deposits prior to an eviction to avoid this.

Julie Ford of HF Assist (pictured) comments: “This case highlights the importance of both landlords and agents keeping accurate paperwork and taking the time to know who is in their property.

“Compliance is the most important part of renting a property and even the most hands off landlords are not immune to the ever changing minefield of legislation.”

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‘Rock star promoter’ landlord must pay back £11,700 to tenants at unlicenced HMO

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A rock star promoter who was too busy touring with A-list musicians to realise he should have had an HMO licence has been ordered to pay back thousands of pounds to his tenants.

Robert Hallet (pictured, above), who has toured or promoted with The Rolling Stones and Justin Bieber, told a First Tier Property Tribunal he was unaware he needed a licence because he hadn’t been told by managing agent NorthWest6.

The ‘global touring expert’ said he was out on the road with bands for most of the year when he could be responsible for the logistics of a tour involving 120 people.

Hallet explained he was not a professional landlord and had used the same letting agency for the last 15 years. This was the first time it had let the property in Kilburn, North London (pictured) to sharers in this way.

Reported to council

His three tenants, Joseph Landes, Alex Parker and Lauren Rosenberg lived at the HMO in Christchurch Avenue, London, from September 2019 and contacted Brent Council in March 2020 about their landlord’s failure to repair a shower and also reported that the house was unlicensed.

Hallet insisted he had responded to any complaints and concerns about repairs at the property in a timely manner and that he had applied for a licence as soon as he was made aware of this.

But the tribunal ruled that his relationship with the managing agents was ad hoc and that he had assumed the day-to-day management of the property.

Hallet’s absence from the country and lack of experience of property management did not amount to a ‘reasonable excuse’, the Tribunal said. It made a rent repayment order totalling £11,712 with £300 costs.

Pic credits: Google Streetview/Twitter

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Green group urges politicians to support new bill ushering in stricter EPC rules for landlords

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Industry body the Sustainable Energy Association is calling for MPs, Lords and the government to support the Minimum Energy Performance of Buildings Bill when it is introduced in both Houses this week.

The Bill, which would mean all private rented sector homes would need to be EPC band C by 2028, advances the government’s energy efficiency commitments set out in the Energy White Paper and aims to help achieve net zero and lower household fuel bills.

Jade Lewis (pictured), association chief executive, says it hopes the Bill receives the support it deserves.

“It can deliver a lasting impact on the energy efficiency of homes up and down the country whilst addressing key public interest concerns such as unemployment, fuel poverty and climate change,” she says.

“We are proud to have campaigned for this policy certainty over the past few years and I believe that we are closer than ever to the breakthrough we have been working towards.”

Many in the PRS have voiced concerns that the deadline puts too much pressure on landlords, particularly following Covid, and could threaten already strained stock levels. 

Last November, we reported that the Lettings Industry Council had written to the Ministry of Housing, Communities and Local Government, urging a more staggered approach to improving energy standards in the private rented sector than those put forward by the Department for Business, Energy and Industrial Strategy.

Energy Performance Certificates (EPCs) measure the efficiency of a home, rated from A – G; two-thirds of UK homes fall below the average band C.

Read more about the controversy surrounding EPC Band C ratings.

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Exodus from city offices boosts demand for neighbourhood space

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The future for city centre office use remains uncertain until we see how the return-to-work drive pans out, but in all likelihood fewer people will travel into these offices on a daily basis. There could be more working from home, and as companies take space in smaller neighbourhood offices and retail units.

The theory appears to be being borne-out in practice, with the likes of South London property agents Henshall & Partners reporting a 60% surge in demand for suburban leases.

Henshall’s MD, Chris Henshall says their figures show that demand for ‘fringe neighbourhood’ commercial space in London has increased by 60% in the past six months, an office type which fits-into what is likely to be future remote and flexible working very easily.

Small neighbourhood offices allow office workers to avoid public transport, to travel in by car, providing there are parking spaces, greatly reduces travel time, and allows specific teams to meet regularly, maintaining that all-important continuity of work-flow and personal contact – something that’s almost impossible to fully replication on-line.

The move will be a boom to small-scale commercial office landlords, whose office space had largely fallen out of favour, and it’s likely to revitalise some high streets as cafes, restaurants, and supermarkets start to expand out of central London and other major cities.

Henshall reports that already several food and beverage businesses have anticipated the change, acting quickly to relocate as more flexible home workers start visiting local shops.

Over recent months, Henshall & Partners have managed to secure leases on several suitable premises, deals which were typically, until now, in unviable parts of London.

Henshall cites, as an indication of the trend, deals including a German Donor Kebab franchisee on Eltham High Street, letting for 40% more than the previous tenancy, a Turkish grill and lounge bar on Lewisham Road, which has let for £40K per year, and an organic café in Greenwich which let for £30K a year

A retail unit on White Hart Lane Tottenham has sold for £700,000 and is set to open as a supermarket, topping off a string of deals which show the trend is more than just a “flash in the pan”.

Rents in places like Greenwich and Lewisham are markedly cheaper than in the West End or the City – posing something of a threat to some of the mega landlords in the city with high-rise blocks, And also city centre retailers, but Henshall & Partners see this “rebalancing” as a positive for local neighbourhoods, and as an emerging way forward for London businesses without hurting the mega landlords too much.

There are signs that City and West End businesses are now over the worst as workers gradually drift back to their offices, albeit with considerably enhanced Covid precautions and re-structured floor space.

Chris Henshall’s MD says:

“In recent months we have seen an increased demand for commercial property in London’s fringe neighbourhoods, most notably from the food and beverage industry. This uptick in commercial demand highlights flexible working being implemented across the capital. I am however keen to see a more balanced approach from employers as restrictions are eased with time in the office essential for productive business and its importance to younger employees to learn and prosper”.

Henshall & Partners was founded in 2017 by Chris Henshall, who has over ten years of experience in the commercial property industry. Henshall & Partners offer services focused on land, development and investment properties across London and the Southeast.

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BREAKING: Tenant referencing revolution kicks off as Ministers consult on digital identity plans

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A revolution in tenant referencing is around the corner now that the Department of Digital, Culture, Media and Sport has launched its consultation on the much-heralded digital identity programme.

This will see a national framework established that will eventually introduce a system whereby people can prove who they are via their digital identity profile most likely through either a website or a smartphone app.

This would remove many of the barriers landlords and letting agencies face when referencing tenant and, at a stroke, significantly reduce tenant fraud within the housing market.

It would also be used when buying a home, setting up a bank account, proving one’s age in a pub, proving your have a valid driving licence and a myriad other uses.

Moving house

“If someone wants to prove who they are when starting a job, moving house, or transacting online, they ought to have the tools do so quickly and securely in a digital manner, as an option alongside using the physical documents we are most familiar with,” says Matt Warman MP, Minister for Digital Infrastructure a the DCMS (pictured, above).

“Too often, people in the UK have to use a combination of paper documents issued by government, local authorities and the private sector – and a mixture of offline and online routes – when they need to prove something about themselves. And they must repeat the process for each new transaction.”

Warman says the government is committed to realising the benefits of digital identity, without creating the controversial system of ID cards. The consultation on the project, which includes proposals to set up a governing body to administer the digital checking system, and a way for people to seek redress if information is inaccurate, closes on September 13^th.

Read the proposals in full.
Read more about tenant referencing.

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