Ministers can’t say how successful Fitness for Habitation act has been

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The government says it is not tracking how many landlords have been prosecuted under the Homes (Fitness for Habitation) Act 2018 suggesting a lack of interest in its effectiveness as a regulatory tool at the top of government.

Given Royal Assent in December 2018 and sponsored by Labour MP Karen Buck with cross-party support, the act amends the Landlord and Tenant Act 1985 so that, where a landlord fails to let and maintain a property that is fit for human habitation, tenants have a right to take action in the courts.

The act enables tenants to seek court orders forcing their landlord to carry out repairs – and receive compensation for having to ensure sub-standard living conditions – and established much stricter rules on what constitutes a property that’s fit for habitation than the previous legislation.

But the Ministry of Justice (MoJ) has revealed that collating details of landlord prosecutions under the act would take more than three-and-a-half days to complete and therefore, the cost of complying would be too great.

This follows a Freedom of Information request made by businessman Ajay Jagota.

The 52-year-old, who recently founded online claims management firm Veriwise, says: “It’s startling how many renters don’t know that there is a law which can force their landlord to repair their homes and even pay them compensation – it’s alarming that the government doesn’t seem to know either.

“I have no idea why you would bring in a new law and then make no effort to see how many times it is actually being used, and the inconsistent nature of the government’s response leads me to speculate that they know a good deal more than they are letting on and are simply embarrassed about the ineffectiveness of this legislation.”

But the lack of data about prosecutions available does not mean legal action is not taking place. In June several lawyers told Inside Housing magazine that the social housing sector had seen a strong uptick in fitness for habitation claims largely due to no-win, no-fee solicitors targeting disgruntled tenants.

Read more about the Homes (Fitness for Habitation) Act 2018.

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31% of properties still selling over asking price

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Propertymark’s July housing report indicates nearly a third (31%) of properties sold for more than the original asking price. This is a significant decrease from June which reported 40% sold over asking price, but closer to May’s figure of 33%.

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It’s Bad News For First Time Buyers As Property Prices Soar, Apparently

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The Guardian is reporting that 1 in 16 companies are on the brink of bankruptcy and that today’s youth will never be able to buy a home due to soaring property prices.

But is it really THAT bad for first-time buyers?

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LATEST: Demand for rental property surges as Covid rules relax

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A surge in demand for rented homes with tenant enquiries reaching a five-year high has been reported by landlords.

So says the National Residential Landlords Association (NRLA) which polled its members in England and Wales on the housing markets.

Of these, 39% confirmed that demand for homes to rent had increased in the second quarter this year – an eight per cent increase on the first three months of the year.

This rise takes the rental market to its busiest since 2016, the NRLA says, saying the relaxation of COVID restrictions and a more buoyant economic outlook have been the key drivers.

But the figures mask a trend which is seeing a two-tier rental market developing across some regions.

In Yorkshire and the Humber, Wales, the South West and the South East over 60 per cent of landlords said that demand for homes to rent had increased.

Stark contrast

In stark contrast, just 15 per cent of landlords in Central London said demand had increased in the second quarter of the year, compared with 53 per cent who said it had fallen, explained by the large numbers of
tenants quitting the capital as home working has taken off.

But despite this boom, the NRLA says a significant percentage of landlords have been negatively impacted by the demands of the pandemic, with 20% looking to sell rental properties.

Chris Norris, Policy Director for the National Residential Landlords Association, says: “The evidence is clear that nationally whilst the demand for homes to rent is increasing, landlords are more reluctant to invest in new properties.

“The only losers will be tenants as they struggle to find the homes to rent that they need. The Chancellor needs to recognise the harm being done by tax hikes imposed on the sector.

“There is a significant flight of tenants from the capital in response to the COVID pandemic. With lockdown restrictions having ended, and offices beginning to reopen, the jury is out as to whether this trend will continue.”

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Demand increases but landlords more reluctant to invest

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The demand for private rented housing has reached a five-year high according to new research released by the National Residential Landlords Association following the easing of COVID restrictions.

The wide-ranging survey of private landlords across England and Wales

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Investment funds reduce exposure to high street property

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Bricks and mortar on the high street has seen a massive shift by UK property funds as they drastically cut their exposure when the Covid-19 pandemic took hold. Lock-down closures and the shift to on-line sales and deliveries have taken their toll on retail rental incomes and rapidly falling asset values.

Property fund managers with direct investments in retail stores have had to renegotiate rents downwards to help tenants survive, while at the same time accelerating their divestment strategy, moving away from the sector, which was already facing long-term decline, even before Covid hit.

According to the FT, there is an estimated £6.4bn of rent arrears in the UK retail sector, and with a ban on commercial property evictions now in place until March next year, much of the arrears is unlikely to be recovered.

According to investment consultants and fund managers FE fundinfo, UK Direct Property has reduced their exposure to retail property during 2021, with average allocation now at 5.9%, down from almost 9% in January 2021.

The £1.2bn AUM M&G Property Portfolio has reduced its exposure from from 38.4% to 29.1% as fund manager Justin Upton explains:

“With retail sales exchanged and currently in solicitors’ hands this is due to reduce even further to around 21% in line with the fund’s strategy.

“We have made strategic sales, which have focused on asset risk such as age/location/sustainability and where we had tenant concerns such as covenant strength, lease length or vacancy.

“These sales have subsequently resulted in our vacancy levels falling to 7.7% as of June 2021 – well below the peer average of 12.9%. Our average lease length has also extended to 7.7 years.”

Similarly, head of UK property at Canada Life Asset Management (CLAM) Michael White said the firm’s retail exposure has fallen through “valuation reduction”, and it has “accelerated the strategy to reduce high street exposure where we are able to do so”.

Arrangements for paying off rental debts have largely been left to tenants and landlords, and in some cases has led to bitter legal disputes.

White explained CLAM has been active in this respect by “negotiating lease re-gears, rent concessions and deferrals on a case-by-case basis”.

He added that while this “has proven to be successful”, there remain “certain parties who still refuse to discuss arrears”.

M&G’s Upton also reported “constant dialogue” with tenants over the last 18 months, negotiating “a variety of payment plans” ranging from deferment packages to rent free packages in exchange for longer terms and lease extensions.

The result of this has been M&G Property Portfolio collecting “more than 90%” of both rental income and service charges for 2020, according to Upton, with the fund delivering an income distribution of 4.7%.

Coronavirus has caused significant disruption for bricks and mortar retail, but the sector also faces the longer-term existential threat posed by the boom in online retail.

As a result, property funds managers have been actively reallocating capital away from bricks and mortar retail to online competitors, with assets like warehouses becoming an increasingly attractive investment.

Fund manager and co-head of institutional UK real estate at Columbia Threadneedle James Coke explained in March: “Within the MSCI UK Property Monthly index, net disinvestment from retail has totalled £3.6bn over the past five years, averaging £60m a month.

“As sales proceeds are redeployed into the industrial sector, its market share – and hence performance contribution – has increased, to the extent it now accounts for 37.3% of the index.”

He said “the migration of retail online”, which been accelerated by the pandemic, has “dramatically impacted many town centres but left a nationwide shortage of logistics space, leading to sustained increases in industrial rents and corresponding compression of yields in that sector as investors have piled-in to an asset class considered a safe haven”.

White said CLAM still favours “the out of town retail format”, but that “essential retail”, such as food and DIY, “remains a viable sector” for the fund.

He goes on: “the migration of retail online”, which been accelerated by the pandemic, has “dramatically impacted many town centres but left a nationwide shortage of logistics space, leading to sustained increases in industrial rents and corresponding compression of yields in that sector as investors have piled-in to an asset class considered a safe haven”.

While high street fashion continues to suffer, with the challenge of of online shopping and a current consumer spend aimed at experiences, such as restaurants and entertainment, fund managers are not giving up on the “out of town retail format” and they still favour “essential retail”, such as food and DIY, which remain “a viable sector” for these funds.

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Fraudster who invested cash in property portfolio faces Proceeds of Crime confiscation hearing

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A conman who police believe used his ill-gotten gains to invest in a property portfolio faces having the homes confiscated via a Proceeds of Crime Act (POCA) court hearing.

Mark McCracken was convicted in 2019 of several high-value scams including masterminding a £600,000 ‘cash for crash’ insurance fraud scheme.

Faced with overwhelming evidence, at the time he pleaded guilty to 11 counts of money laundering and perverting the course of justice.

Prior to the this, when police raided properties linked to him, some £77,000 in cash was found along with evidence at his home within a secret cupboard that he had created fake identities.

To recover his proceeds of crime, McCracken now faces a three-day hearing during which police will highlight the scale of his frauds and its intention to use powers under the POCA to seize the properties.

Property portfolio

These are believed to be in Wigton, Cockermouth, Maryport and Carlisle.

A spokesperson from Cumbria Police told LandlordZONE that it would be able to reveal whether the properties had been rented out once proceedings against McCracken are concluded, mostly likely in early December.

McCracken is expected to contest the attempt to confiscate his assets, local media reports.

POCA sets out the law in relation to the recovery of criminal assets with confiscation being the most commonly-used power.
This normally only occurs after a conviction has taken place and is designed to prevent criminals benefitting from their crimes and to act as a deterrent.

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BREAKING: Leading property firms back ‘trackable’ EPC passports scheme

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A group of 14 leading property organisations lead by the Nationwide Building Society have called for Environmental Performance Certificates (EPCs) to be turned into a green property passport scheme.

This would enable the green performance of homes including rental properties to be tracked via a single EPC-based reference point, the group says.

“It is time for the EPC to become a ‘living document’, akin to a building passport, that reflects changes made to the home,” a spokesperson says.

A report by The Nationwide accompanying the campaign says the challenges of upgrading the UK’s ageing property stock is considerable and, as many landlords are aware, using heat source pumps as a replacement for gas boilers is rarely practical.

“Tackling ongoing emissions will be a major challenge, with large parts of the housing stock very ‘hard to heat’ using low carbon technologies in an economic way,” the report says.

“For example, some 81% of all EPC-assessed homes built before 1966 have an EPC rating of D or lower.

“Around one third of the 2.6 million EPC-assessed homes built since 2008 have a maximum potential EPC rating of C or below.”

Raised rating

As LandlordZONE reported last month, the NRLA recently said the government’s ambition to see all rented properties raised to an energy rating of band C or above by 2030 is a ‘pipedream’ unless upgrades are backed with financial and practical support rather than rhetoric.

The Nationwide-led group’s call for an EPC ‘building passport’ are part of a seven-point plan that it says will be needed to jump-start a ‘retrofit revolution’ and help reduce carbon emissions.

A previous attempt to do this, the government’s Green Homes Grant scheme, ended prematurely after many landlords and homeowners found it difficult to source approved contracts to do the work along with the scheme’s complicated application and financing rules.

The group led by the Nationwide also includes British Gas, Energiesprong UK, E.ON, The Federation of Master Builders, Igloo Regeneration, Legal and General Modular Homes, Midas Group Ltd, Professor Tadj Oreszczyn of the UCL Energy Institute, Rockwool UK, Smart Metering Systems, Switchd, and Trustmark.

Read the Nationwide report (opens as PDF).

Read more about property passports.

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London Landlords rush to sell their £10 million property portfolios in less than a week

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You’ve no doubt been watching property prices rise over the past few months, and if you’ve been reading the news, you probably know that experts and private landlords are agreeing, now is the best time to sell your portfolios before we have to wait another 7 years for the next market high.

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Landlords accused of ‘greed’ as thousands switch from traditional to holiday lets

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Landlords with properties within the UK’s key rural and coastal holiday hotspots have been accused of greed as many switch from traditional long-term rentals to holiday lets, ironically persuaded to do so by more generous tax breaks.

A councillor in Suffolk are the latest to berate landlords for switching properties to Airbnb or holiday cottage rental platforms.

Liberal Southwold and Reydon district councillor David Beavan told local media that: There will be no community left…I think they don’t rent locally as they make lots from holiday lets. It’s pure greed.

“The first problem locally has been [that[ prices are inflated and secondly holiday rents going up more rapidly and provide higher returns and are more profitable,” he says.

A property search on Rightmove makes the point; only three properties are available to rent outside of the county’s two ‘working towns’ while hundreds of properties are available on Airbnb at rents of £150-£200 a night which is five or six times the average monthly rent locally.

And while profits from these short-term lets have in the past been offset by long void periods during the low-season, restrictions on foreign travel during Covid means many have been fully booked for months on end over the past year-and-a-half.

Generation Rent has also campaigned on the topic, publishing a blog that also claimed holiday lets are pushing up rents for traditional properties.

Airbnb listings

It says Cornwall has 62 homes to rent on Rightmove but 10,290 AirBnB listings and that within one village in Wales, three quarters of the houses are holiday homes.

And as LandlordZONE reported recently, Anthony Mangnall, the Tory MP for Totnes, recently declared a housing emergency after local complaints about a shortage of rented properties.

Also, Generation Rent has launched a petition calling for the tax benefits afforded holiday let landlords but not traditional let landlords to be withdrawn, which 43,000 people have signed so far.

The NRLA agrees, saying recently that it wants “to ensure the tax system encourages the provision of longer-term rental property over short-term holiday lets.

“From April this year, the final phase of reducing mortgage interest relief for landlords to the basic rate of income tax will be completed.

“This measure does not apply though to furnished holiday lets. This has encouraged the removal of properties from the long-term market for use as short-term holiday lets.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlords accused of ‘greed’ as thousands switch from traditional to holiday lets | LandlordZONE.

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