Generation Rent appeals to mortgage lenders not to evict tenants

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In a bid to safeguard tenants facing potential homelessness when a landlord falls into BTL mortgage arrears, one tenants’ rights group is urging mortgage lenders to uphold their ‘moral obligation’ not to evict tenants.

The call comes from Generation Rent and its chief executive

View Full Article: Generation Rent appeals to mortgage lenders not to evict tenants

Council reveals 43 fines totalling £217,000 for rogue landlords

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One of London’s big councils says landlords with properties within its boundaries have been issued with fines totalling £207,500 for not licencing HMO properties.

The extraordinary sum covers a four-year period which includes 43 fines with a further 16 warnings that were resolved before being becoming a Civil Penalty Notice.

Haringey council has warned any other landlords who have yet to licence their HMOs that as well as a fine the council will help their tenants chase them through the Tribunal system for a Rent Repayment Order.

Cllr Sarah Williams, Cabinet Member for Housing Services, Private Renters and Planning, says: “We will do everything in our power to protect our residents in the private rented sector in Haringey.

“Our HMO licensing scheme provides us with an even better platform to do this.

Renters’ rights

“Whilst we continue this journey to improve housing standards across the borough, we will fight for renters’ rights and ensure residents across Haringey live in homes that are well managed, of good quality and most of all, safe.

“As shown with this case, landlords who fail to comply will face tough enforcement action. Rogue landlords will not be tolerated in Haringey.”

The fines will cause some controversy among its landlords, whether they are compliant with its HMO and Selective Licencing schemes or not.

Decent homes

In March Haringey was censured for managing its own stock of rental properties poorly, with the Regulatory of Social Housing finding that 30% of its homes did not meet the Decent Homes Standard and that thousands of requests to repair properties had not been completed.

The council was also criticised recently following an National Residential Landlords Association (NRLA) investigation into its Additional (or HMO) licencing scheme.

It said the council’s own data revealed that “Haringey is inspecting properties but finding significantly fewer category 1 (i.e. serious) hazards than you would expect if the properties were substandard, which the council used as justification for introducing the designation”, said Samantha Watkin (pictured), Senior Policy Officer at the NRLA.

View Full Article: Council reveals 43 fines totalling £217,000 for rogue landlords

Landlord banned after shoe-horning dozen people into illegal property

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A landlord has been banned for allowing 12 people to live in his unlicensed HMO that was branded a fire risk.

Ashiq Rasul has been removed from the landlord register in Scotland after Glasgow City Council’s licensing committee heard the eight-bedroom property in Paisley Road West (main picture) was inspected by fire service and council officials, who discovered exposed wiring.

They also found a lack of smoke alarms, doors with padlocks and had concerns over the condition of the boiler and gas hob, reports the BBC.

Committee chair Alex Wilson said the landlord had made “glaring errors” and told Rasul: “It looks as if you have just shoehorned people into this property and it’s not fit for purpose.”

Concerns

Wilson (pictured) added: “There are items identified on inspection which are massive causes for concerns, where you’ve got exposed wiring. That was a recipe for disaster. You could have easily had a fire in that property.”

When a council official made an unannounced inspection, Rasul, who would occasionally stay at the flat, failed to identify himself and maintained he was a friend of the landlord.

The official added that no legionella risk assessment, proof of building insurance or information on tenancy deposits had been provided. A suspension of rent order was issued in February.

Rasul’s son claimed most of the work had been carried out, and that a gas safety and electrical report had now been provided to the council.

He told the committee: “It’s mostly students in there, they’ve been getting their pals over. Whenever we go over, the pals are just stopping for a wee bit, that’s what we’ve been told. They’re going to leave, but they end up staying.”

Read more: The Complete Guide to renting an HMO.

View Full Article: Landlord banned after shoe-horning dozen people into illegal property

End landlord squeeze or face social breakdown, Ministers warned

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The boss of one of the UK’s biggest lenders has warned of impending social breakdown unless the squeeze on private landlords is eased.

Skipton Building Society chief executive, Stuart Haire (main picture), says “demonised” landlords are dealing with crippling taxes, rising mortgage costs and increased red tape that has made the housing crisis worse.

In an interview with the Telegraph, he blamed unaffordable property prices and rising rents for a disappearing middle class. Haire said a toxic mix of rising costs meant it no longer made financial sense for some landlords to stay in the sector, and that the resulting reduced supply of rental accommodation meant more people on social housing lists as well as higher prices.

“You’ll have an awful lot of people maybe back living with the family in difficult circumstances, you’ll have a lot more social pressure,” he predicted.

Breakdown

He added that there was “a genuine risk of social cohesion breakdown” triggered by a lack of housing affordability and increasingly divided fortunes between the “haves and have nots” in society that could give rise to “desperate acts”.

Haire urged the government to think harder about the impact of higher taxes and other costs imposed on landlords and ultimately renters.

“There’s [fewer landlords] coming in. It’s just all becoming a bit hard. They’re not yet selling up, because there isn’t yet the level of buying demand in the market because mortgage costs are going up.”

Gavin Richardson, MD of Mortgages for Business, echoed Haire’s comments and questioned what would happen if landlords were taken out of the housing equation.

“The impact on the property market would be significant and almost entirely negative,” he said. “It’s not as if the government is pouring money into social housing or making any progress on house building. Landlords are bailing the government out.”

Read the interview in full.

View Full Article: End landlord squeeze or face social breakdown, Ministers warned

Tenant activist groups and the law of unintended consequences

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It’s not often that two separate stories manage to tell the unfolding horror of what is happening to the private rented sector – and both involve so-called tenant activist groups.

This is a story about unintended consequences and the sting in the tail that is coming to tenants everywhere.

View Full Article: Tenant activist groups and the law of unintended consequences

New student tenant alleges mould – but we can’t find it?

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Hello everyone, I have a student tenant who moved in on July 1st and as soon as little more than 2 weeks later he was already threatening legal action against me and going to the council for alleged mould issues.

View Full Article: New student tenant alleges mould – but we can’t find it?

Trouble with managing agent over directorship?

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Hello, I own a flat in a block of 15 flats. Some of them are rented and some of us live here. We own the freehold.

I am a shareholder and was a director at one point. I didn’t resign as a director.

View Full Article: Trouble with managing agent over directorship?

Which type of agreement/tenancy do I need?

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Hello, I have a prospective tenant who wants to rent my property. They are actually friends of mine.

They are from Lithuania and have passed all necessary checks. I have only ever let before using Assured Shorthold Tenancies.

View Full Article: Which type of agreement/tenancy do I need?

Will serviced office companies survive?

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Serviced offices one would surmise, offer the ideal solution in a post-Covid world. Mainstream office investments are struggling in a world where a good proportion of most company’s office staff are working flexibly, either at home or on the move. Serviced offices, it would seem, offer many advantages.

The benefits of serviced offices include cost-effectiveness: they offer short-term leases so no long term commitments; all the useful facilities needed are provided on site; they are easy to move in and out of; they are usually well situated in business districts; they are maintenance free; they have fast internet access; and they easily facilitate networking.

Dispute all of this, many providers are experiencing the same difficulties as the general office market. The technology that’s enabling home and mobile working is having a similar impact on serviced offices.

The WeWork problem

The US listed company WeWork – a $47bn company with 44 million square feet of office space world wide – the so called world-changing office space provider – is evolving into a shaky entity that is casting a shadow over the whole flexible office sector. If you listen to the hype around this company, it can provide cheaper office space in a work-from-anywhere post-Covid-19 world with all the benefits listed above.

The reality, it seems, is something far different. Operating as the middleman is proving to be tough in the current environment. WeWork rents commercial office properties off landlords on long-term leases, it provides all the necessary facilities and services for a modern serviced office operation on site, and then it lets off piecemeal, offices and meeting rooms on short term (monthly or weekly) flexible leases and day rentals – something akin to a business hotel.

But WeWork announced in August that it had “substantial doubt about its ability to continue as a going concern” with­out a rapid turnaround in its business. Although there’s since been a share price bounce driven by speculative buyers who are keen to see the turn-around phenomenon seen with other strug­gling US companies, nothing can hide the fact that WeWork has lost 98 per cent of its value since its initial public offering (IPO) in late 2020.

Covid losses

Both WeWork and IWG (formerly UK based Regus) rely on generating their revenues by renting offices off office landlords and then subleasing them on flexible terms to their short-term tenants. Both have recorded years of losses, and Covid has driven these to a new level.

Covid drove down down the demand for office space, so both companies, tied in to long-term leases, found the cost of providing services to their custom­ers was exceeding the amount of cash they were bringing in. The last time IWG posted a pre-tax profit was in 2019 and WeWork has never posted a pre-tax profit.

There is obviously an appetite for a more successful version of a large serviced office operation, says The Investor’s Chronicle. In the UK, IWG’s share price recovered 10 per cent of its value when the last results were announced and after management said it was considering a US listing. Perhaps its inves­tors were pondering the potential positive impact for IWG of WeWork’s potential collapse. The development could also provide a growth opportunity for UK listed real estate investment trust (Reit) Workspace which specialises in providing serviced offices and workspace for London based tech start-ups.

A high debt base

According to The Investor’s Chronicle IWG’s latest results show that it is spending more than £500mn every six months on leases, while its net debt on the balance sheet, includ­ing lease liabilities, is £6.2bn, that’s 34 times larger than its shareholder equity.

While the company did manage record revenue and an operating profit for the six months to 30 June this year, by contrast, WeWork, which has even greater debt, negative shareholder equity* and billions more in lease payments to manage, posted an operating loss of $555mn (£436mn) for the same period.

WeWork has warned investors that its survival depends on a new plan to improve liquidity and profitability over the coming 12 months. This will involve a cost-cutting programme, a drive to retain existing tenants and an effort to attract new tenants.

A deal with its major funder, Softbank, meant that its debt maturities have been pushed back and a $1bn cash injection provided. WeWork is obviously looking to better times, but for IWG, despite its own heavy debt loading, revenue growth and talk of a US listing, and WeWork’s troubles, could see the UK company “stealing a march”.

Landlords enter the fray

One headwind that both WeWork and IWG are coming up against in the business of serviced offices is landlords with vacant buildings. These traditional office landlords are becoming their competitors. The UK’s two biggest office Reits are Land Securities and British Land, both of which are growing their own flexible workspace brands, known as Myo and Storey.

London based Workspace PLC is another UK listed company that competes directly with WeWork and IWG, but their product is slightly different. Whereas Workspace has a model based on short-term leases, usually measured in months or years, WeWork and IWG generally let out space based on months, weeks or even days.

Most office landlords would prefer the traditional long-lease model, without the hassle of providing additional management and services. The traditional FRI lease offers “let it and forget it” “clear return” capabilities, but needs must: a building generating short-term income, albeit with additional services to be provided, is preferable to an empty building with no income and generation running costs.

According to real estate data provider CoStar, WeWork rents more office space in London than any other tenant, and with central London office occupancy still far below 2019 levels, its demise would be a terrible blow to their landlords.

Between a rock and hard place

It leaves these landlords in the unenviable posi­tion of having to decide between giving lease incentives to WEWork to keep the company going, or taking the opportunities that may arise to re-let their empty city centre buildings, at a time when the future of the office market is so uncertain.

As Mike Prew, property analyst at Jefferies, has said: “[WeWork’s] rental obligations have little or no landlord recourse”. These two companies, WeWork and IWG, currently cleverly maintain the “whip hand” with a model of leas­ing buildings using subsidiaries that they simply allow to collapse if they are unable to pay the rent.

IWG threatened to do this during Covid. It’s a nasty practice that upsets landlords, but it does offer these service companies protection, though given their precarious position right now, WeWork may be too far gone for that.

The future is flex

Meanwhile there are many hundreds of flexible office space and serviced office space providers running profitable small-scale businesses throughout the UK. These are on a much smaller scale that the large PLCs mentioned above, but they can offer exactly the facilities businesses need on a local level.

International property agents Savills says:

“Over the past couple of years we have seen a number of forward-thinking landlords recognising the benefits of flexible office space and become early adopters of including it within their overall office offer.

“As we move further into 2023, we expect this trend to continue as the need for agility that allows occupiers to scale up and down as required, becomes a vital requirement. This will either be through landlords offering flex space directly or through a serviced office operator.

“We also anticipate that significant service charge inflation will play a part in some businesses looking to reduce footprints by circa 10 per cent as they grapple with the conundrum of rising costs vs the need for quality.

“The provision of flexible space in the same building as conventional offices will not only provide an ability to flex up and down, but it will also act as insurance against businesses who may underestimate the desire and need of colleagues to be in the office.”

The jury is still out as to the true long-term impact of working from home (WFH) and flexible working. There is a distinct trend of a gradual drift back to the office as some of the downsides of scattered operations become apparent.

It is likely that some form of hybrid working will persist but it is unlikely to be on a scale we’ve seen during Covid or even in its immediate aftermath.

View Full Article: Will serviced office companies survive?

London police get lessons in protecting tenants’ rights

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The Met Police has issued new guidance for frontline officers around illegal evictions, starting with the presumption against eviction, and for the tenant to remain in their home.

Its updated approach also states that if it is out of hours, and there isn’t a court-appointed bailiff present, then it is considered illegal.

The Greater London Authority has worked with Safer Renting and Generation Rent to help make the changes. Mayor of London Sadiq Khan says that for too long, rogue landlords have been able to take advantage of the fact that there were few protections in place to safeguard London’s renters from illegal evictions.

Robust guidelines

“These new, robust guidelines will ensure that London renters not only have a much clearer sense of their rights, but that frontline police officers are far better equipped to respond to incidences of tenants being harassed, threatened or illegally forced out of their homes by their landlords,” adds Khan.

Police aren’t usually called to the vast majority of evictions, unless there’s a fear of breach of the peace or an incident, according to Landlord Action’s Paul Shamplina. Tenants have typically already left or will wait for the court warrant document in order to get rehoused.

Squatting laws

However, he tells LandlordZONE that educating the police makes sense. “I’ve taken calls from police officers asking me for advice because there’s an issue of landlords carrying out unlawful evictions.” However, he notes that forces still don’t fully understand the laws around squatting – despite a law change back in 2012.

Shamplina adds: “There are 32 London boroughs – let’s hope that they are all educated to the same level.”

View Full Article: London police get lessons in protecting tenants’ rights