Suburban landlords to see bonus as more renters commute into London

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Better transport links to the capital have boosted the number of Londoner commuters happy to spend time on the tube or bus.

Renters are living further away from the office than they did seven years ago because this doesn’t necessarily equate to longer journey times due to improvements such as the new Elizabeth Line, resulting in a larger ‘commutable London’, according to Foxtons.

It reports that in 2016, 27% of Londoners were working in central London but living in outer London boroughs, while this figure rose to 39% in 2022.

A shift in the requirements from both buyers and renters for increased space to live and work has influenced their move to outer boroughs.

Foxtons has also seen the return of Londoners who moved out during the pandemic. In 2020, for every one renter moving into London, 1.1 renters moved out, compared with just 0.7 renters moving out of London for every new renter moving into London last year.

Fewer people

In the rental market, Foxtons found that fewer people want to share in large households. Properties with three or more renters comprised just 11% of new lets in 2022, down from 15% in 2019. Those who do share are looking for extra space, 11% more on average compared to 2019.

Lettings MD Gareth Atkins (pictured) says: “London never stands still, and the continual expansion of its transport network means that new areas are opening up opportunities to homeowners, renters and landlords.

“Locations along the route of the Elizabeth line, for example, are increasingly popular and are benefitting from London’s latest addition to its extensive rail network.”

View Full Article: Suburban landlords to see bonus as more renters commute into London

‘FEELING THE SQUEEZE’: Third of tenants spending half their salary on rent

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More than one in three tenants in the UK spend at least half their salary on rent, according to new data from flat-share site SpareRoom.

Its poll of 11,000 private renters reveals that 81% spend more than 30% of their take-home pay on rent, leaving them ‘rent burdened’, meaning they are likely to have difficulties affording essentials such as food, transport and medical care because rent is eating up their disposable income.

The data also shows that there has been a shift in what is considered reasonable; between 2019 to 2021, the percentage of renters who classified their rent as unaffordable was about one in three, but now 54% deem their rent to be unaffordable.

Women are feeling the strain more than their male counterparts, says SpareRoom, with 85% spending more than 30% of their salary on rent each month, compared to 77% of men.

Larger proportions

Unsurprisingly, the data shows that tenants in London, the South East and South West are spending a larger proportion of their take-home pay on rent than other regions.

In the capital, 86% of renters pay more than 30% of their salary on rent, followed by 83% in the South West and 82% in the South East.

SpareRoom director Matt Hutchinson (pictured) says: “With over 80% of the UK already rent burdened, and over a third spending over half of their salary on rent, people are really feeling the squeeze, and rising rents will only cause yet more affordability issues for those renting in the UK.

“It’s crucial the government understands the severity of this situation and starts to help, or this housing crisis will become a housing disaster.”

Read more: Rents rise again in April.

View Full Article: ‘FEELING THE SQUEEZE’: Third of tenants spending half their salary on rent

UPDATED – Dilapidations in Commercial Property

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Dilapidations or disrepair often result in disputes between landlord and tenant. The only way to avoid that is to thoroughly document the condition of the property at the commencement and end of the tenancy.

Most commercial leases required the tenant to maintain the property and to undertake any necessary repairs. Under what’s known as a full repairing and insuring (FRI) lease, this normally includes interior and non-structural repairs and where the property is self contained, it may include structural repairs as well.

If the tenant fails to keep the property to its pre-let condition, usually referred to as “tenantable condition”, the landlord can make a claim by issuing a Schedule of Dilapidations to the tenant. This outlines the work required to return the property to its pre-let state.

Key Points

• Dilapidations claims can be substantial, so tenants should fully understand their obligations before entering into the lease.
• Tenants should have the building surveyed for pre-existing defects before signing a lease and these should be incorporated into a schedule of condition.
• Landlords should ensure that a schedule of condition is drawn up at commencement and incorporated into the lease so both parties can agree to this.
• Final schedules of dilapidations are usually prepared by a chartered surveyor at lease termination.

Dilapidations – Commercial Leases

Dilapidations is a term used when referring to the condition of a commercial property during the term of the tenancy or when the lease ends. It means the same as disrepair and is tied in with the repairing and decoration obligations in the lease agreement.

Dilapidations and schedules of dilapidations have serious financial implications for commercial (business) tenants and well as landlords, so they both should ensure that they fully understand these implications and take steps at the outset to minimise misunderstandings before signing a commercial lease.

Full Repairing and Insuring Lease

It is of particular relevance to landlords and tenants where the property has been let under the terms of a standard commercial Full Repairing and Insuring (FRI) lease where the tenant is responsible for repairs, both internal and external, sometimes including the structure of the building. The FRI lease is the norm rather than the exception in commercial property rentals particularly with longer lease, for example in excess of 5 years.

In the case of multi-occupied buildings external and structural repairs such as periodic painting and roof repairs are usually carried out by the landlord and charged to the tenant through the annual service charge.

Tenants, in their eagerness to start trading are often negligent when it comes to dilapidations and agree to leases, even short-term leases, which have full repairing and redecoration obligations, and they fail to record the ingoing condition of the property.

Landlords and tenants should always make sure that leases for commercial properties include a thorough schedule of condition, ideally supported by photographic evidence.

Initial Building Survey

Before taking on lease obligations tenants should consider commissioning an in-going building survey carried out by a chartered building surveyor. Through this exercise the surveyor will produce a schedule of condition to be incorporated into the lease document.

At the end of a lease the tenant is almost always obliged to leave the property in a good state of repair and decoration, and this would in most cases be a better state than it is actually in at the lease end.

Tenants often fail to appreciate this obligation and don’t allow for this extra cost. Even when they have recognised their obligations, their budgeting is often far from adequate.

Landlords and tenants with a dilapidations claim need to be aware that there are statutory limits to the amount that the landlord can claim from the tenant.

The provisions of the Landlord and Tenant Act 1954 can lead to certain tactics being employed in the dilapidations process and the time to analyse these tactics is several months (at least 6 months) before the lease comes to an end.

Thinking ahead in this way means that any necessary works can be planned or negotiations conducted which could considerably reduce the landlord’s claim.

Schedules & Tactics

The landlord may serve a Schedule of Dilapidations on the tenant at different stages of the tenancy:

1. A schedule served during the fixed term of a lease is known as an interim schedule.
2. A schedule served within the last three years of the term is a terminal schedule.
3. A schedule served at or after the end of a lease term is a final schedule of dilapidations.

An interim or terminal schedule will specify both the disrepair alleged by the landlord and the remedial works which the landlord requires the tenant to undertake. This gives the tenants the opportunity to arranged to have the necessary repairs completed itself, as opposed to having the landlord do this, and receiving a large bill.

The difference with a final schedule is that whilst it contains the same alleged breaches of covenant and details of remedial work required, here the tenant will not have an option to carry out the works itself since his right of occupation has ceased.

With final schedule therefore the remedy for the landlord is to claim for damages which will cover the cost of remedial works, AND loss of rent, service charges, rates, professional fees and VAT for any period during which the property is off the lettings market.

The Schedule of Dilapidations:

The Schedule of Dilapidations is simply a listing of all outstanding repair, maintenance and decoration items which a landlord (or more likely its surveyor) has determined have arisen under the terms of the lease being the tenant’s repair and maintenance obligations.

The tenant is obliged to carry out the remedial works listed in the schedule or pay to the landlord damages which equate to the cost to the landlord of carrying out the works.

Schedules of Dilapidations are often the cause of disputes between landlords and tenants, the result of which may mean court action. A court will ultimately decide upon what is relevant and what is not in the Schedule of Dilapidations but going to court increases the costs considerably, usually for both parties. It is far better to avoid litigation and reach a mutual settlement.

Statutory Relief for the Tenant

With an interim schedule, the tenant may obtain relief from forfeiture proceedings (eviction) under the Leasehold Property Repairs Act 1938. This is providing the original term of the lease exceeds 7 years, of which 3 or more years must remain un-expired.

In some situations the tenant may be entitled to relief. In the case of a final schedule and corresponding claim for damages, the tenant may be protected by Section 18(1) of the Landlord and Tenant Act 1927. This is with the proviso that:

1. The landlord cannot recover damages exceeding a sum by which the value of the landlord’s investment is reduced by the tenant’s breach of covenant.
2. Where a landlord intends to demolish the building or carry out structural alterations such that the tenant’s breaches of covenant to repair become irrelevant, then if the tenant can prove his case absolutely, no damages will be recoverable by the landlord.

How can the Tenant Limit his Dilapidations Liability?

There are some practical steps that tenants can take to limit dilapidations liability. For example, in initial negotiations for a new lease, particularly with short leases, the tenant may insist that the repairing liability be restricted to leaving the building in no worse condition than at the start of the lease, as an alternative to accepting full liability.

The word repair in a lease sometimes includes a liability to renew, for example, where a roof was so dilapidated that renewal was the only practical option. So, to limit any repairing liability a Chartered Building Surveyor should be instructed by the tenant to produce a Schedule of Condition, recording the state of decoration and any pre-existing items of disrepair.

These precautions as also very relevant on assignment where a new tenant takes on the obligations of an existing tenant. Here alterations and disrepair must also be considered carefully by the tenant considering the purchase (assignment) of another tenant’s lease.

If breaches and alterations are identified prior to the purchase of the lease, the tenant may be in a position to negotiate for a reverse premium from the outgoing tenant.

Professional Help in Dilapidations Matters

Landlords and Tenants will almost certainly need professional help, ideally from a chartered surveyor when dealing with these matters particularly if there is likely to be a dispute.

In the case of the landlord, schedules must be accurate and able to stand legal scrutiny.

In the case of the tenant, the advisor acting needs to determine:

1. Is the schedule of dilapidations accurate?

2. Is the standard of repair required by the schedule justified?

3. Are there any appropriate statutory reliefs which may be applied?

4. Should the tenant organise the repairs and if so under what times scales, or would it be preferable to pay damages?

Pre-Action Protocol

The Civil Procedure Rules – Pre-Action Protocol – covers all civil disputes including dilapidations claims and covers pre-action behaviour in cases not covered by a specific protocol.

The Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy (the ‘Dilapidations Protocol’

View Full Article: UPDATED – Dilapidations in Commercial Property

How to select a managing agent?

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Hello, We wish to obtain quotes from managing agents to take over the management of our small block of 7 flats. I have obtained a list of 5 agents who operate in our area but only one of them is ARMA accredited.

View Full Article: How to select a managing agent?

Michael Gove backtracks on student let reforms

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In what appears to be a sudden U-turn, housing secretary Michael Gove is apparently backtracking on his Renters’ Reform Bill, just a week after unveiling it, the Daily Telegraph reports.

It says that the government is now reconsidering whether it should end assured shorthold tenancies for student lets to become periodic tenancies.

View Full Article: Michael Gove backtracks on student let reforms

Landlords urged to boost communication for fire safety rules

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Landlords and letting agents have been warned that updated fire safety regulations need to be strictly adhered to so they will ensure that tenants in high-rise buildings are safe from any potential danger.

The warning comes from inventory provider No Letting Go

View Full Article: Landlords urged to boost communication for fire safety rules

Battle over holiday lets hots up as campaigning MP holds meeting

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The increasingly rancourous debate between Airbnb landlords and legislators will come to a head in York this week as the city’s MP convenes a public meeting to discuss the growing problem of short lets within its walls.

MP Rachel Maskell (main picture) is one of six mostly Labour MPs sponsoring an Early Day Motion in the parliament that would establish a Short Term Holiday Let Licencing Scheme across England and is also behind moves to use planning laws to regulate them.

They are calling on the Government to:

• Bring forward legislation to allow local authorities to introduce local licensing schemes to determine standards and place limits on short term holiday lets;
• Allow local authorities to determine the terms for holding a license including the license fee, health and safety standards, terms of operation, and penalties for those in breach of licensing terms including fines and termination of licenses;
• Empower local authorities to determine areas where the granting of new short term holiday let licenses will be restricted.

Ministers in England have been paying attention and on April 23^rd launched two consultations – one on planning and the other on a registration scheme – to try and balance the needs of local businesses serving the ‘staycation’ sector and the ‘hollowing out’ problems too many Airbnb properties can cause for local communities.

York is one of the battlefronts along with Edinburgh and many English and Welsh coastal and rural hotspots such as the Lake District.

Maskell recently revealed that there are some 2,000 Airbnbs operating within York and is urging everyone including Airbnb landlords to contribute to the Government’s consultation.

She believes Airbnb or short-lets must be curbed both in York and across the nation, saying that she was “determined to see the law change over Short Term Holiday Lets and these two Government consultations are the next step of the journey”. 

Her meeting takes place on Thursday 25^th at 6.30pm at Southlands Methods Church in York.

Picture credit: Labour Party/Rachel Maskell

View Full Article: Battle over holiday lets hots up as campaigning MP holds meeting

Difficulties remortgaging due to higher interest rates affecting lenders affordability criteria

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Many landlords are reporting that it has become increasingly difficult to remortgage as a result of higher interest rates affecting lenders’ affordability calculations.

Last week I spoke to one landlord whose mortgage interest is now greater than his gross rental income

View Full Article: Difficulties remortgaging due to higher interest rates affecting lenders affordability criteria

LATEST: Decent Homes Standard ‘missing’ from Renters (Reform) Bill

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Environmental health bodies are to press the government on why it omitted plans for a Decent Homes Standard in the Renters (Reform) Bill.

Despite including most of the promised draft legislation, the expected standards were missing and only mentioned in an accompanying press release which explained: ‘The government will also bring forward legislation as part of the Bill to: Apply the Decent Homes Standard to the private rented sector for the first time…this will help deliver the government’s Levelling Up mission to halve the number of non-decent rented homes by 2030.’

The standard currently only applies to the social housing sector, outlining that homes must be free from serious health and safety hazards and how landlords must keep homes in a good state of repair so that renters have clean, appropriate, and useable facilities.

The Fairer Private Rented Sector white paper, published last year, suggested this would soon apply to privately rented homes and the government’s consultation is apparently still ongoing.

Committed

A spokeswoman tells LandlordZONE: “We remain committed to legislating on the Decent Homes Standard and will do so as soon as possible.”

The Chartered Institute of Environmental Health says it will seek to understand the reasons for the delay over the proposal and is urging the government to deliver on decent homes.

Stuart Fairlie (pictured), MD of energy assessor accreditation scheme Elmhurst Energy, believes the vast majority of landlords should already be conforming.

“Private landlords are understandably concerned about the property improvement-related regulatory changes coming their way, but most of these fears are not based on fact.

“It is the lack of clarity around what these [EPC] laws mean that is fuelling their fears about whether they can afford to remain in the private rental sector,” adds Fairlie.

View Full Article: LATEST: Decent Homes Standard ‘missing’ from Renters (Reform) Bill

POLL: Portfolio landlords moving to commercial as PRS becomes more difficult

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Large portfolio landlords are feeling upbeat despite the tough economic climate, with many eyeing the commercial sector for their next property purchase.

The Handelsbanken professional landlords survey – based on research among large UK investors with an average of 29 properties worth £14 million each – found that 59% expect to expand their portfolios, while only 14% expect to sell some or all of them.

Over half (57%) of those looking to buy properties plan to diversify into new sectors, with offices (43%) attracting the most interest as investors look to take advantage of depressed valuations.

The strong interest in commercial offices is surprising given the uncertainty around post-Covid 19 office occupancy and the rise of working from home, says Handelsbanken.

Correction

However, as values have undergone a correction over the past few years, many investors will probably be waiting for opportunities to buy at reduced cost with a view to longer term value creation, re-purposing assets and/or capitalising early on shifts in working patterns back towards more office usage.

James Sproule (pictured), UK chief economist at Handelsbanken, adds: “Commercial property values saw a major correction in the second half of 2022 as a direct impact of the higher interest rate environment.

“Average retail property prices were down by 15%, office prices were also down by 15%, and industrial unit prices were down by 25%.”

Three-fifths of those expanding their portfolio aim to buy in new regions, according to its poll. London was cited as the most attractive region over the next 12 months by investors (27%), followed by the South East (26%) while Yorkshire and the Humber and the West Midlands only attracted interest from 9%.

Three fifths (60%) of respondents have had requests for rental deferments/contract renegotiation while more than half (54%) have seen the number of void months increase over the past 12 months.

Read more: Safeguard your commercial property.

View Full Article: POLL: Portfolio landlords moving to commercial as PRS becomes more difficult