Subletting excess office space – could this be the future, post Covid?

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One leading Belfast IT firm has just sublet its office space in the city as home working or hybrid working has taken hold in the company, and this looks like outlasting the Covid pandemic.

Liberty IT in Belfast has bitten the bullet on the issue and decided to lease its excess space in response to what it has termed the ‘new normal’, that is having most of its staff settling in to the hybrid way of working.

Reducing costs

IT work of course lends itself to this new mode of work, and the same won’t apply to every organisation. But if the trend really is here to stay there could be a fair bit of excess space in city offices and there will be an opportunity for companies to reduce their property costs by sub-letting.

Liberty is one of Belfast’s oldest-established IT or “tech” firms. Even as the guidance to work from home wherever possible has been lifted, the company has taken the decision to sublet over 9,000 square feet of its city headquarters building, Adelaide Exchange.

Is subletting a viable option for unwanted office space?

As yet there is no consensus view, or a definitive roadmap, as to whether businesses will be inviting or even demanding that employees, to return to their work places full time. The indications are though, most businesses of a certain type, where employees are able to work productively and flexibly, that is at home or on the move, then some form of hybrid working will become the norm and existing space will become surplus.

With the current economic situation as it is, when inflation has take off and costs are rising all round, businesses are seriously looking at ways to reduce their costs. One obvious saving world be to reduce a large slice of overhead – their property costs.

After salaries, property costs are usually a business’s biggest expense. During Covid, many businesses had to invest heavily in the IT infrastructure necessary to allow home working, so a saving on their rent payments would be one big way to off-set those costs going forward.

Subletting is one solution

But subletting is not without its difficulties. There are legal implications for both tenant as well as their landlord, and there may be a need to physically re-configure part of the building, from simply partitioning off work-floors and access ways, to some more major structural changes.

Companies that are commercial tenants with excess space are likely to be tied into a lease which may or may not have provision for subletting. But what options does a commercial tenant have if they find themselves tied into a lease and paying rent for offices that are now larger than they need?

Getting sound advice

Whether the lease prohibits subletting or not, the starting point should be discussions with the landlord, and both sets of solicitors – transparency is paramount. Following that, advice from local commercial agents should be sought to find out if there is the likely demand for the space, and how they would go about marketing it.

The legal and practical implications

The usual arrangement under subletting is that at new tenant would be found to occupy a suitable portion of the building with the original tenant still responsible to the head landlord to fulfil the lease obligations, including the rent payments and service charges. The tenant becomes landlord to the sub-tenants, charging a rent and apportioning the service charges accordingly.

It is almost certain the head landlord will have to give consent to the new arrangement and will want his or her lawyers to sanction the underlease. The original tenants will still carry their obligations under the repairing and maintenance clauses for the whole building, so it will be in their own interest to tie up the legals to protect themselves against the actions of the subtenants.

Subletting is a way of using excess space to save costs while allowing the business to stay in its existing premises.

If a tenant is not concerned about staying in the existing premises, and especially if the lease, or landlord prevents a sublet, that the tenant may consider triggering a break clause, if one is near, assigning the whole lease to another tenant, or trying to negotiate a surrender of the lease with the landlord. The latter course would usually entail paying substantial compensation to the landlord for the remaining income stream – the rent payments – being forgone.

However, a tenant could increase his chances of obtaining a lease surrender if he were to offer up a suitable tenant willing to take over. Covenant strength and length of lease commitment are the all important factors in a commercial letting, so a new attractive covenant and long lease may just swing it with the landlord.

A refurb opportunity

A change of tenant could well be an opportunity for refurbishment. There are looming obligations to be met for the new energy efficiency (MEES) standards. And a modern office building many well benefit from, and be made more marketable, if it is upgraded for heating, cooling, ventilation and IT infrastructure, as well as an optimised configuration for post Covid working.

View Full Article: Subletting excess office space – could this be the future, post Covid?

Sadiq Khan wants landlords to pay ‘tenant relocation payments’

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London Mayor Sadiq Khan is urging the next Prime Minister to bring in ‘tenant relocation payments’ when a renter is being moved through no fault of their own.

He made the comments to the London Assembly during a debate on the Fairer Private Rented Sector White Paper that has been published by the government.

View Full Article: Sadiq Khan wants landlords to pay ‘tenant relocation payments’

Outer London’s landlords report a surge in demand

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The proportion of landlords operating in Outer London who have reported increasing demand from tenants has surged since the previous quarter, Paragon Bank reports.

The bank says that it has carried out research that reveals in the first quarter of 2022

View Full Article: Outer London’s landlords report a surge in demand

The Hawks increase interest rates by 0.5%

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The Bank of England Monetary Policy Committee (MPC) voted by a majority of 8 – 1 in favour of the Hawks to increase interest rates by 0.5% this month to a Base Rate of 1.75%. This is justified by a near doubling in wholesale gas prices since May

View Full Article: The Hawks increase interest rates by 0.5%

Insurer reveals most bizarre landlord insurance claims

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When landlords need to claim against their insurance, the reasons can be mundane – or simply bizarre, as one landlord insurance firm has revealed.

Total Landlord Insurance has released details of six of its most unusual claims.

Melissa Choules

View Full Article: Insurer reveals most bizarre landlord insurance claims

New ‘locals first’ housing policy announced to protect Welsh language

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The government in Wales has revealed more plans to intervene in the property market and help stop properties in Welsh-speaking areas being sold to outsiders for second homes or holiday lets.

This announcement is part of a renewed attempt to protect the Welsh language and often rural or coastal communities who speak it, and raise the number of people speaking the language to a million by 2050.

This includes a new Commission for Welsh-speaking Communities that will recommend policies in two years’ time.
But in the meantime, the Minister for Education and Welsh Language, Jeremy Miles, is due to reveal more details of the proposal.

It will include a voluntary ‘fair chance scheme’ to help sellers make decisions about how they sell property by allowing properties to be marketed locally only, for a fixed period.

The Welsh Government will also work with organisations such as estate agents to address the housing needs of those communities.

This scheme is part of a wider effort in Wales to stop communities being affected by the purchase of local homes by Airbnb investors and second home buyers.

Last month, the Welsh Government and Plaid Cymru announced further plans for new planning laws, a licensing scheme for visitor accommodation and proposals to change land transaction tax in areas with Jeremy Miles said: “For the Welsh language to thrive, we need sustainable communities and good job opportunities in the areas where it is widely spoken.

“Through our Welsh Language Communities Housing Plan, and the Commission for Welsh-speaking Communities we’re announcing today, we and our partners will work together with communities where Welsh is the main language and help them develop plans which protect their identity and our language.”

Read more about the property market in Wales.

View Full Article: New ‘locals first’ housing policy announced to protect Welsh language

EXCLUSIVE BLOG: Do Rishi and Liz understand the challenges landlords face?

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Liz Truss and Rishi Sunak continue to battle it out to become Prime Minster, but what will this mean for housing?

Sunak and Truss have talked about homeownership and with the challenges that many face getting onto the housing ladder, but have remain tight-lipped about detailed policies as regards the private rented sector (PRS).

Both candidates have sidestepped the issue of the growing supply crisis in the PRS, which comes at a time when the cost of living is increasing across the board. However, they need to grasp the nettle, if the party’s homeownership ambitions are to become a reality.

So what do we know so far?

Rishi Sunak has stressed the importance of supporting people in social housing into homeownership.

Whether this focus on owner-occupation will be at the expense of the private rented sector, in terms of policy decisions is unclear, but it is a concern.

In terms of housing in general Sunak wants a renewed focus on developing brownfield sites and stopping the practice of land banking.

In terms of taxation, Sunak has not called for immediate tax cuts, arguing that it would drive inflation up and it is simply not affordable at the current time.

He has also made a big play of the need to improve the energy efficiency of the housing stock. He has hinted that he will prioritise insulation for low-income households over new technologies such as heat pumps.

Forthcoming

Liz Truss has been more forthcoming when it comes to the PRS. She plans to revive with proposals to enable PRS tenants to record their rent with credit reference agencies to help them improve their credit score, something which could help them when it comes to buying their own home.

This move would also provide landlords and agents by providing evidence that prospective tenants have a history of paying rent in full and on time. The NRLA believes this to be a good idea.

She has also gone on record saying she wants to make ‘buying and renting property cheaper and easier for people’, going on to say she is ‘concerned’ about the levels of regulation faced by landlords. She is also against rent controls, which she said would result in fewer properties being available to rent.

Elsewhere she has called for the development of low planning zones: new investment zones with clearer planning rules and less ‘red tape’ allowing developers get on with building straight away in a bid to generate jobs and opportunities and wants to abolish centralised housing targets.

Tax cuts are central to her campaign, however her favoured economist, Patrick Minford, has said that interest rates will have to rise as high as 7% to allow tax cuts, something that would have a huge impact on landlords with interest only mortgages.

What does this mean for the rental reform agenda?

The message on the ground, at the Ministerial meetings we have attended is ‘business as usual’.

Consultation on the Government’s White Paper ‘A Fairer Private Rented Sector’ continues at pace, and with rental reform a Conservative manifesto promise, while there could be delays, it is not likely to go away.

The NRLA is currently conducting what we want to be the biggest ever landlord and letting agent survey on the proposals. Well over 2,000 landlords have already taken the survey, with the responses to be used as the basis for our submission to Government in response to the White Paper and continued lobbying work. You can access the survey here and, if you are an agent, please complete and share with your clients.

What is the NRLA doing?

In addition to the survey we have written to the two leadership candidates’ campaigns teams, stressing the next Prime Minister must address the supply crisis in the private rented sector as a matter of urgency.

The figures are stark. Data shows 23 per cent of landlords are going to sell off homes in the next 12 months.

This is forcing up rents in the midst of a cost-of-living crisis and has seen waiting lists for council houses grow. Increased rents mean it will take tenants much longer to save for a deposit for a home of their own, something both candidates have flagged as an issue.

In our written briefing we have stressed this is a direct result of the restrictions on mortgage interest relief for landlords and the stamp duty levy on additional homes.

Since this began to be implemented in 2017 the number of private rented homes in England has fallen by over a quarter of a million and we are calling on whichever candidate is ultimately successful to end this hostility to landlords and take steps to encourage investment to meet the rising demand.

Removing the stamp duty levy alone would see almost 900,000 new private rented homes made available across the UK over the next ten years. This would lead to a £10 billion boost to government revenue through increased tax receipts according to analysts, Capital Economics

At the NRLA we believe a change of administration is the perfect chance for a new start, a change of attitude from the top down, recognising the value of private landlords in providing vital homes to let and generating much needed income for the Treasury.

We will continue to lobby on these issues and question candidates on their housing policies ahead of the vote, which closes on September 2.

Author bio

Ben Beadle is Chief Executive of the NRLA.

View Full Article: EXCLUSIVE BLOG: Do Rishi and Liz understand the challenges landlords face?

Green mortgage search and filter introduced by Moneyfacts Analyser

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Moneyfacts Analyser has been updated so users will now be able to search and filter for ‘green’ residential and buy-to-let (BTL) mortgages.

Currently, the system will provide details for 525 residential mortgages and 302 BTL mortgages in the green mortgage market.

View Full Article: Green mortgage search and filter introduced by Moneyfacts Analyser

Green search and filter introduced by Moneyfacts Analyser

admin    Uncategorized     agents

Moneyfacts Analyser has been updated so users will now be able to search and filter for ‘green’ residential and buy-to-let (BTL) mortgages.

Currently, the system will provide details for 525 residential mortgages and 302 BTL mortgages in the green mortgage market.

View Full Article: Green search and filter introduced by Moneyfacts Analyser

You couldn’t make it up! Britain’s most bizarre landlord insurance claims revealed

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Not all insurance claims by landlords are for mundane items like damaged coffee tables or soiled carpets, a surprising new survey has revealed.

Total Landlord Insurance has trawled its recent pay-outs to reveal a clutch of jaw-dropping circumstances which led to landlords making claims ranging from £1,250 to several hundred thousand pounds.

The most expensive involved a WWII bomb found in Surrey last year that had to be detonated in situ and, despite attempts to mitigate the shockwave, lead to one landlord’s house being badly damaged structurally.
A pay-out of £204,000 ensued after the remedial work, and the cost of lost rent after the tenants had to move out, racked up.

The next most expensive was a rental property at which an engineer’s bodge job during a cooker renovation led to an explosion that cost £30,579 to repair, while the most bizarre was the £1,200 bill for a new front door after police had to batter it down to rescue a tenant lodged between their bath and a wall.

Footie soaking

Other cases include a property flood that occurred when a woman washing items in her sink was lured away by the excitement of a Euros football match, only to return two hours later to find the rest of the flat, and her downstairs neighbours, flooded. It cost £10,870 to remedy. 

Melissa Choules (pictured), Claims Specialist at Total Landlord Insurance, says: “Sometimes, real life is stranger than fiction and as landlord insurance providers we hear some quite remarkable stories.

“But just because a story is unusual, it doesn’t mean the damage caused is any less serious and disruptive.

“That’s why having insurance is so important – you never quite know what’s going to happen and failing to secure the correct cover can leave you severely out of pocket. Trust us, we’ve seen it all.”

Read more: the costliest landlord insurance claims ever made.

View Full Article: You couldn’t make it up! Britain’s most bizarre landlord insurance claims revealed