EXPERT: Axing ‘No fault’ evictions could scupper rent-to-rent model

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Abolishing Section 21 ‘no fault’ evictions risks sounding the death knell for the current rent-to-rent model, a leading housing legal expert has claimed.

Anthony Gold solicitor Robin Stewart (pictured) believes that when residential tenancies in England become effectively indefinite in length, landlords are likely to be even more cautious about who they grant tenancies to.

Rent-to-rent businesses who grant assured shorthold tenancies won’t be able to claim they can guarantee things will go smoothly at the end of their tenancy and there will be no way to get the property vacant to return it to the landlord.

“This suggests to me that rent-to-rent will not survive as a popular business model in its current form after the abolition of Section 21 notices,” he says.

However, Stewart adds that it’s unlikely rent-to-rent will disappear completely.

Some businesses will use ‘licence agreements’ rather than tenancy contracts, on the basis that a licence can be terminated by ‘notice to quit’ whenever required.

“This can be legitimate if the contracts really are licence agreements but using sham licence agreements when the circumstances really amount to a tenancy is well recognised as a scam, and this can be prosecuted as a criminal offence under consumer protection legislation,” he says.

Other rent-to-rent businesses will not attempt to evict their tenants, and when the agreement ends and they hand the property, the landlord will become the direct landlord.

 “This might be a good thing – after all, why should tenants have to leave a property just because there is a change of management,” says Stewart

“If the landlord does not want to have to deal with the tenants they have ‘inherited’, they can appoint a managing agent. This arrangement might become the norm, but I suspect that it will prove to be unattractive to landlords.”

Read Robin Stewart’s comments in full on the London Property Licensing website.

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Possession order granted for property guru’s flat after racking up £200k rent arrears

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Bankrupt property guru Glenn Armstrong faces having his home repossessed after racking up rent arrears of more than £209,000 while he promoted his training courses.

A possession order was granted against his wife Charlotte Geneva after Clerkenwell County Court (pictured) heard the lease on the property in Blackfriars Road, London, was taken out on 18th July 2019 but that no rent was paid from October 2019. The couple will have to leave by 24th August or face eviction.

Journalist Chris Mitchell reports that Geneva shouted at him in court and had to be asked to leave. Last month, Mitchell was exonerated of harassment and malicious communications allegations against the couple.

He says: “She called the police…who refused to take any action and sat in court to ensure she did not flare up again.

False claims

“The judge refused an application by her solicitor to have the hearing in private, as the police had advised the judge that previous false claims had been made against the journalist which had all been ‘no further action’ and that the stalking civil complaint was also dropped by the police when investigations were completed.”

Armstrong was declared bankrupt in February, owing £4.9 million to dozens of creditors.

He also has 10 unpaid county court judgements against his related companies dating back to 2017, totalling £566,987, as well as 10 unpaid personal county court judgements totalling £418,342.

Armstrong (pictured), who has appeared on Channel 4’s How the Other Half Live and The Secret Millionaire, has spent years selling courses and home study programmes for people wanting to make cash out of property.

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Lettingsupermarket celebrate 10th anniversary with Property118 exclusive deal

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Following the release of their new management system and landlord interface, our recommended letting agent Lettingsupermarket.com are offering property118 readers an exclusive deal to celebrate their 10th year in business.

Whether you are looking to let your property or transfer management immediately or in the next 12 months by signing up in the month of August you will receive 6 months management at a 50% discount when instructing Lettingsupermarket.com in the next 12 months. 

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Ministers considering move to bring back partial ‘green homes grant’

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Ministers are considering boosting the Clean Heat Grant due to launch next April to encourage house holds and landlords to replace gas boilers and resurrect – in part – the failed Green Homes Grant.

The Clean Heat Grant will offer £4,000 as a one-off payment to help with the upfront cost of replacing a boiler.

One option is to increase the grant to incentivise people to buy heat pumps – which currently cost about £10,000 – in the next couple of years, reports The Telegraph.

“It could become more generous,” a government source said, adding that the criteria for the payment could also be widened to allow larger, non-domestic buildings to qualify.

Both options could cost tens of millions of pounds, meaning they would need sign off from the Treasury, which has capped the scheme at £100 million.

Green Homes Grant?

Business Secretary Kwasi Kwarteng (main pic) is very keen that something equivalent to the scrapped Green Homes Grant is brought back to encourage owner occupiers to take the steps to decarbonise their houses.

A final decision will be made and published in the heat and buildings strategy next month.

The government hopes to fit 5.5 million heat pumps in UK homes by 2030 with the aim of phasing out all gas boilers by 2035, while landlords have been tasked with raising the energy efficiency rating of all their properties to at least band C by 2028.

Its PRS consultation document reports that about 67% of rented properties are rated at less than EPC C, posing a risk to tenant health and leading to higher bills; those rented homes with an EPC C rating are also worth about 5% more than those currently at EPC D.

However, building expert Roger Bisby recently warned that plans to ditch gas boilers for heat pumps was a, “car crash coming in slow motion”. Bisby tells viewers on his Skill Builder channel that after getting a £4,000 government grant for a heat pump, you’d have to spend £16,000 to make it work.

Ben Beadle, Chief Executive of the National Residential Landlords Association, says: “We all want to see energy efficient rental homes. They cut bills for tenants, make homes more attractive to potential renters and help the country to achieve its net zero commitment.

“The Chancellor needs to develop a financial support package that works for landlords and tenants. This should especially be targeted at the hardest to treat properties where the cost of work will be prohibitive for landlords. In this way, he will also be doing the most to help the fuel poor.”

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Landlord wins battle with council over ‘unfair’ selective licensing fine

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Common sense has broken out temporarily in the court system after a landlord successfully overturned a £2,500 fine for unknowingly letting her flat without a licence while she lived abroad.

Irene Ekweozoh began renting out the flat in Axon Place, Ilford (pictured) in 2007 when she moved to Canada but didn’t give Redbridge Council her new address, which means she did not know its new selective licensing scheme had been introduced in July 2017.

She only discovered the change in November 2018 and immediately sent in an application. However, in May 2019 she was fined for the six-month period the property had been rented without a licence.

Ekweozoh appealed against the decision which has now been overturned.

Fine scrapped

Judge Martin Rodger ruled that the fine should be scrapped, arguing that the landlord had committed an offence of “moderate seriousness” and should only be given a warning.

He added: “The basic facts of this case are that a landlord with a single property…was unaware of the need for a licence, having been absent from the country for ten years.

The appellant’s non-compliance with the licensing requirement did not therefore cause a significant risk (or any risk) to the occupants or to the public as a whole.

“This seems to me to be a case in which the appropriate disposal, in accordance with the respondent’s policy, is to deal with the matter informally.”

A Redbridge Council spokesman said it was disappointed with the outcome but accepted the judge’s findings. He added: “The scheme helps the council to protect the health and safety of private renters and improve the quality of privately rented homes in the borough.”

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Yes minister, there’s already a ‘lifetime deposit’ to offer tenants

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While the cost of renting continues to increase across the UK, the Government continues to grapple with the issue of making renting more accessible and secure, especially for the more vulnerable in our society.

The Renters Reform Bill, announced in the 2019 Queen’s Speech and reaffirmed by the Government in May 2021 will, amongst other initiatives, look to introduce the concept of a ‘lifetime deposit’ to try and deal with the end of tenancy ‘deposit overlap’, whereby many tenants must find a new deposit for a new tenancy before the old one is released by the landlord, agent or authorised deposit scheme. 

Details are currently sparse as to what this ‘lifetime deposit’ will look like and what it means for landlords and renters, but the slowly growing deposit replacement market will surely be looking at these changes as a chance to capitalise on one of their core USPs; deposit replacements already deal with the end of tenancy overlap as no physical cash is involved. 

While the debate in the UK rages as to whether deposit replacements are a good thing or not, elsewhere in the world deposit replacement products are already gaining traction.

In the US, companies such as Rhino have taken the rental market by storm with more than 1.2m renters now enjoying deposit free renting and the number is growing month on month.

Some states are now progressing plans to legislate for landlords to offer deposit replacements alongside cash deposits, or in some cases as the primary option.

Others are following suit. Leap have announced the launch of their services in Australia to assist the country’s rental community following the lifting of eviction moratoriums and a scarcity of affordable homes in highly populated cities.

In Germany, companies such as Ocyan and Kautionsfrei are well established and other European countries are starting to launch their own versions. 

Common thread

The common thread to all these deposit replacement companies is their commitment to make deposit free renting look and feel the same as using a traditional deposit.

In other words, they provide the same protection and security to both landlords and tenants as they would get if they opted to use a traditional deposit.

Deposit caps differ from country to country, ranging from one month’s rent equivalent up to three months. If a tenant has to find a £1,000 cash deposit, then the deposit alternative provides £1,000 protection to the landlord. There is none of this ‘increased coverage’ that benefits the landlord but actually penalises the tenant who is paying for the product. 

Another constituent feature of all the above-mentioned products is the ability to pay for the deposit replacement monthly rather than upfront, thereby providing an even more affordable option as well as mirroring the behaviours of monthly rental and utility bill payments.

This also means tenants only pay for the length of their stay, rather than a yearly or two-yearly product that may not suit the tenant’s needs.

Transparency

Product literature is transparent, making it explicit that the tenant is always liable for damages and missed rent/bill payments rather than terminology and soundbites that make the tenant think they are purchasing an insurance product that covers their responsibility to pay.

While the UK also has its fair splattering of deposit replacement schemes only one company, Ome, offers both a monthly payment model as well as capping the protection to the landlord at the same level that would be provided by a traditional deposit – i.e. five or six weeks depending on the annual rental amount.

Launched in 2020 and operated by Hamilton Fraser, the people behind the government authorised tenancy deposit protection scheme mydeposits and Client Money Protect, the mission is to offer real choice to the tenant while providing the same protection to the landlord as if they had taken a traditional deposit. 

One decision

Eddie Hooker, CEO of Hamilton Fraser (pictured), comments: “Tenants should only have one decision to make when it comes to security deposits – do I pay a traditional deposit or do I opt for a deposit replacement product? They shouldn’t have to worry that a replacement product that they are paying for benefits the landlord more than if they paid a cash deposit.

“They should also feel comfortable that, should they owe the landlord for damages or unpaid bills at the end of the tenancy, the deposit replacement company will treat them fairly and deal with the dispute in the same way that a deposit protection scheme operates.

“They want to know that their provider has a deep knowledge of the private rented sector and dispute management. Ome deals with these challenges whilst offering a simple monthly payment model for the duration of the tenancy (starting from just £5 per month), and dispute repayment plans should there be monies owed at the end. This is all backed by a business that has been operating in the sector for more than 25 years.”

Landlord’s agreement

“Already the deposit replacement product of choice by some of the UK’s largest student rental businesses, Ome also offers the option for tenants to unlock their current deposit with the landlord’s agreement.

“This feature helps both the landlord and the tenant by dealing with some of the smaller rent arrear issues caused by the ongoing COVID pandemic and other short term employment gaps.

“And of course, because there is no physical cash deposit to pay, tenants have the complete freedom to move home without the fear of the ‘second deposit problem’ caused by traditional deposit protection.

“By looking further afield and learning from the behaviours and practices of other established rental markets, deposit replacements can evolve in the UK and become a real option for many of the UK’s renters.

“By choosing the right deposit replacement product, landlords in turn can rest assured that they continue to be afforded the same protection and support as if they took a cash deposit, but without the regulatory hassle that goes with it.  A win-win for both landlords and tenants.”

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Has regulation of the industry become too much for some landlords?

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Post-COVID, the landscape for landlords and lettings business owners shows further regulation and tightening of the rules.

The latest likely squeeze on landlords comes from the Minimum Energy Efficiency Standards, which are expected to require a minimum EPC band C certificate by 2030.

Also, the Renters’ Reform Bill is back on the agenda with the recent Queen’s Speech confirming the government’s intention to ‘enhance the rights of those who rent’.

This will include measures to be proposed in a White Paper due this autumn, with legislation to enter parliament soon after. This is expected to include:

• Abolishing Section 21 – so-called ‘no fault’ evictions – and improving security for tenants in the private rented sector, as well as strengthening repossession grounds for landlords under Section 8 when they have a valid cause.

• Proposals for a ‘lifetime’ tenancy deposit that eases the burden on tenants when moving from one rented property to the next.

• Reforms to drive improvements in rented accommodation. This includes well-targeted, effective enforcement that drives out criminal landlords. This could include a national landlord register and requiring all private landlords to belong to a redress scheme.

• A set of measures to hold “bad landlords” to account so they deliver safe and decent housing to tenants, without penalising good landlords.

• Improving and reforming the court possession process to make it quicker and easier for both landlords and tenants to access. 

But overall, as landlording gets tougher, you may need to find new ways to manage two key tasks better than before:

• Manage tenants expectations by providing a service in line with government expectations, and even better.
• Reduce expenses by finding more cost-effective services and partners.

We regularly hear from landlords at our parent company All services 4u and one of the big questions is ‘how many more changes are there going to be and will they cut into my margins?’.

It’s a tough question to answer but in all probability, this is going to happen.

But there is one thing that we are sure of – landlords must find ways to protect themselves against these changes and do it in the most cost-effective manner possible.

And because our clients keep on asking us for help, we created the Total Asset Protection Plan. It’s a ‘one-stop shop’ that can handle all your maintenance headaches for a fixed cost per month.

Our plan takes that a step further. With TAP not only is your boiler covered, but also the electrics, locks and many other features of a property. What’s more, you will also have your Gas Safety certificate and EICR electrical check costs included.

For a monthly fee, all of your maintenance costs are covered and, given all of the legislation changes, and the fact that landlords are now treated as ‘service providers’, your life would be made much simpler. No more panicked calls from your tenants anymore, or tough conversations.

Let the maintenance professionals take care of these conversations and serve as the middle person between you and your tenants.

If you would like to learn more about how this works and how we can bring down landlords’ maintenance costs (depending on your number of units), please email accounts@allservices4u.co.uk and make your subject TAP LAUNCH OFFER and we will send you a voucher code for 10% off.

We will call to help you with the joining process. It is easy, hassle-free and comes with a guarantee. 

This will give you even more satisfaction and shield you from the stresses that naturally come with being a London landlord.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Has regulation of the industry become too much for some landlords? | LandlordZONE.

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REVEALED: Landlords now risk fines totalling £55,000 after regulation surge

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Successive governments’ attempts to clamp down on rogue operators within the PRS means errant landlords are now exposed to fines totalling £55,000 as well as unlimited Rent Repayment Orders and up to three years in jail under Right to Rent regulations, it has been revealed.

This extraordinary tally is highlighted by Paul Shamplina, Chief Commercial Officer at Hamilton Fraser, who wonders if many landlords have ever been shown the reality of failing to be compliant.

He also says many landlords’ views on property management might change if they were shown the full list of fines and penalties they face.

“While these are the most extreme cases, I think it presents a clear picture that there is more emphasis than ever on landlords to be professional and compliant – there is no margin for error,” he says.

“Self-management is more challenging now than I have ever known it to be in the 30 years I’ve been involved in the private rental sector.”

Rights awareness

Shamplina also warns that tenants are becoming increasingly aware of their rights, partly due to local and national government campaigns to raise awareness but also efforts by key housing campaigning groups to highlight rogue landlords in the media.

“I think it is disappointing, especially after all the hard work landlords and tenants have gone through over the past year to work collaboratively, that such narratives are used,” he says.

“It creates a divide that suggests landlords and letting agents have no interest in having well-informed customers and are therefore mistreating their tenants.”

Shamplina says there will always be a small number of landlords and letting agents who deliberately fail to provide tenants with adequate information, the vast majority take their responsibilities seriously.

Find out more about Shamplina’s landlord course on self management.

Read his full-length blog on the regulation and landlords.

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EXCLUSIVE: Controversial landlord reveals all over ‘commercial waste’ arrest

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Multi-millionaire landlord Fergus Wilson has been arrested after clashing with a council worker over furniture removal outside one of his properties.

Wilson’s workmen were loading dissembled furniture into a van in Perryfield Street when the environmental health officer from Maidstone Council arrived.

An altercation ensued, the police were called and he was arrested on ‘suspicion of assault’. However, after being taken to the police station, he was released without charge due to a lack of evidence.

He tells LandlordZONE: “The officer concerned called me racist for referring to him as a ‘petty little Hitler’. I told him he had blue eyes, blond hair and was English just the same as myself.

“He said I had assaulted him. I am 73 years old in a few days but if I had punched him he would have been out cold.”

Disgruntled neighbour

Wilson believes a disgruntled neighbour reported the workmen and that there may have been confusion over whether they were actually his employees and legitimately on a job.

He explains that the disagreement arose over the definition of commercial waste.

“The house is being sold after the tenants had moved out and has a stairway with a bend in it where you can’t get up conventional furniture.

“The council seems to think that if the landlord dissembles flat pack furniture to remove it, such as a dining room table – in order to reassemble at another house – it is to be regarded as commercial waste. However, if you do not disassemble it, such as a settee, then it is not commercial waste.”

Wilson adds: “Maidstone has the most acute housing situation in Kent but I’m not surprised if they carry on like this.”

A Maidstone council spokesperson tells LandlordZONE: “Maidstone Borough Council can confirm that a vehicle was seized in Perryfield Street which was carrying materials that required a waste carrier’s licence. We are unable to comment further on the incident as it is currently being investigated by Kent Police.”

Read more about Fergus Wilson.

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What will retail commercial tenants be looking for in the future?

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Over recent years retail landlords have had to accept that they are in a tenants’ market, so even before Covid they already had to adapt or see their premises vacant for long periods. Covid just made this situation worse.

The number of empty shops on UK high streets has risen to its highest level in many years as city centres, especially London, suffer from a dramatic drop in worker and visitor footfall. Now, on average nationally, more than 12% of shops remain vacant compared to around 10% just over 12 months ago.

The number of empty premises is rising in six out of ten UK regions, according to the retail analysis firm Springboard, with Greater London suffering by far the worst blow, they say, with empty shops increasing by nearly two-thirds.

This rise in boarded-up shop fronts comes as the number of visitors to towns and large city centres has continued to fall, with some high streets seeing around half the number of the usual visitor numbers during Covid.

Many retailers were already struggling before Covid hit, but now the demise of the UK’s high streets has seen a dramatic downward shift as sales migrate to towards online shopping and home deliveries.

The pandemic has merely accelerated what was an inexorable trend, some experts have said by as much as five years. The genie is unlikely to be forced back into the bottle, so it’s a trend shop owners will have to live with, it is becoming the new norm in retailing, where a large number of retail stores become redundant and in need of re-purposing.

However, all is not lost. In some locations there will still be a healthy demand for small retail and office space, often in the suburbs where many of the properties are owned by small-scale landlords. But how to attract and keep good retail tenants?

The length of the lease

With far less certainty in the business world than is the past, and when things change much more rapidly than they used to, shorter leases are the favoured option for most business tenants. Gone are the days of the 20, 15, 10 or even 5 year leases. For some tenant, 3 years with a mid-term break is what they are looking for.

So, it doesn’t come as too much of a shock to retail commercial landlords that shorter leases are being demanded, as the trend has been ongoing for years. Long leases simply do not provide sufficient flexibility for retailers in this new rapidly changing marketplace.

Given that in some locations up to 30% of retail units are sitting vacant and boarded up, which not only makes it difficult for landlords to secure new tenancies, it means that rental values can have dropped by as much as 50%

In the current climate landlord have to accept that the rents they achieved in previous times are simply not achievable today, and it may even be necessary to allow other concessions and offer incentives for tenants to take on a new tenancy, such as rent-free periods.

But what’s the alternative?, having a shop stood vacant with all the costs that incurs for the landlord. It’s far better to have the shop occupied with a lower return, and the tenant paying business rates, insurance, utilities charges and basic maintenance costs.

One saving grace is that in return for the security of a shorter lease, tenants should be willing to pay a higher rent, or alternatively, the landlord may be willing to offer a lower rent in return for a longer lease. If lower rents afford the tenant the opportunity to make more profit, it provides more long-term security for both landlord and tenant.

What concessions are tenants looking for?

Traditionally with commercial leases it’s the tenant that takes all of the risk. The landlord is guaranteed a rent amount for the full term of the lease, or at lease until a break, regardless of whether the tenant is trading successfully or even whether it is solvent or not.

Generally, throughout the period of the pandemic, sensible landlords have recognised that it’s in their own interests to keep their tenants onboard and to help their tenants survive. As such many that can have offered concessions such as rent holidays or reduced rents, or rent loans during lock-downs, where tenants have been unable to trade.

Turnover Rent

Tying rents to the level of turnover or the tenant’s business is one way that landlords can share some of the business risk with their tenants. It is a method that has increase in popularity as the Covid pandemic has progressed, but many landlords enter into this type of arrangement reluctantly.

Turnover rents usually involve the tenant paying to the landlord a low basic rent, to be topped up depending on the level of turnover the retailer achieves. If the retailer is very successful, then obviously the landlord is well in pocket, but the reverse is true. If the retail sales are low then the landlord shares the hit with the tenant.

The new relationship created between the landlord and tenant can be successful, but it calls for a high degree of trust and professionalism on both sides. The tenant must be prepared to “open up the books” to the landlord or the landlord’s accountant and the niggly details need to be ironed out beforehand, such as what happens to returned goods, what happens in respect of online sales, etc.

What of the future?

With many retail businesses, from small single stores to large retail groups, having gone into administration, a trend accelerated by the pandemic, the survival of many retailers that are just “hanging on in there” will depend on landlords and tenants coopering and working together for both their interests. If that means sharing some of the business risk then so be it – better than having an empty unit on your hands.

Though much retailing activity has switched to online, bricks and mortar shops still have a role to play. Many online operations will be conducted from retail premises, operating a hybrid retail model, with both in-store and online sales, click and collect and rapid returns.

The traditional English full repairing and insuring (FRI) lease, though much favoured by landlords in the past, is looking increasingly dated in the current retailing environment. Without concessions on the part of landlords, in what is undoubtedly a tenants’ market, many premises will fail to let.

With acknowledgements to The Scottish Grocer

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