HMO landlords warned not to over-charge ‘all inclusive’ tenants as energy bills soar

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Following energy regulated Ofgem’s decision to raise the price cap by nearly £700 a year per household, HMO landlords have been warned to observe the ‘maximum resale value’ and not offset their higher energy bills by charging their tenants extra.

Student house shares, professional HMOs and dedicated build-to-rent properties that form part of a larger development often offer all-inclusive tenancies.

The warning came after Labour MP Steve McCabe asked the government to clarify whether it had assessed the potential capacity of a landlord or letting agent to increase a tenant’s utility bill mid-way through an assured shorthold tenancy contract.

Housing Minister Eddie Hughes replied that where the landlord was responsible for paying the energy supplier and billed the tenant separately to rent, they could only charge for the ‘maximum resale price’ which includes the energy the tenant has used, the tenant’s share of the standing charge, and the VAT owed.

Landlords and agents who offer ‘all inclusive’ rent deals are deemed to energy resellers and are governed by Ofgem rules.

Its guidance states that if the reseller (landlord) underestimates the cost of energy supplied, “he is obviously entitled to recover the amount undercharged from the customer”.

Civil proceedings

But it warns that anyone who charges more than the maximum resale price may face civil proceedings for the recovery of the amount overcharged and might also have to pay interest.

Some HMO landlords are doubtless considering increasing rent to recoup the added expense.

Read more: The complete guide to running an HMO property.

While HMOs have traditionally generated higher returns than standard properties (between July and September last year, individual flats achieved average yields of 5.9%, according to consultancy BVA BDRC, while HMO yields were a fifth higher, at 7.2%) rising interest rates have now started to erode margins.

Many HMO landlords have already received higher energy bills because of the move towards working from home, which has driven up home energy use.

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LATEST: Official Boiler Upgrade Scheme launches today – but is it enough?

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The government’s Boiler Upgrade Scheme launches today amid fears that landlords will need longer-term funding to help them meet energy efficiency targets.

Grants to encourage property owners in England and Wales to install low carbon heating systems such as heat pumps are now on offer, allowing landlords to claim £5,000 towards the cost of an air source heat pump, £6,000 for a ground source heat pump, or £5,000 for a biomass boiler if the house is in a rural location and not connected to the gas grid.

An installer will apply for the grant on their behalf and the value is then taken off the price paid.

Landlords can still apply under the three-year scheme if they have received separate funding for energy efficiency upgrades such as insulation, doors or windows.

Anyone applying must have a valid Energy Performance Certificate, typically issued in the last 10 years.

However, Propertymark believes a national retrofitting programme backed up by longer-term funding is what’s needed now.

Timothy Douglas (pictured), head of policy and campaigns, says pockets of funding are starting to emerge, but that they are just a “drop in the ocean”.

“The property sector needs a national retrofitting programme that’s linked to realistic and achievable targets and dedicated, long-term grants that take into account the age, condition, and size of properties,” adds Douglas.

“Unless landlords and homeowners are given sustained financial incentives, it is unlikely any real progress will be made in helping them to cut carbon emissions and reduce energy bills.”

The government has proposed that new rental properties will require an EPC rating of C or above by 2025, followed by all tenancies from 2028. Along with the new grants, it also introduced a 0% VAT rate on selected energy efficiency materials in the recent Budget.

Find out more about how to apply.

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‘Do proper checks on guaranteed rent firms before you sign up’ landlords warned

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An established guaranteed rent provider has advised landlords to carry out a credit check and due diligence on companies in the sector before signing up – just as they would a prospective tenant – to protect themselves from potential problems. 

Wendy Clarke (main picture), boss of Harlow-based The Rent Guarantee Company (TRGC), acknowledges that while her firm offers a risk-free solution to landlords, the sector is largely unregulated.

“We are aware of a company offering guaranteed rent on a promise, when a simple Companies House search shows they only made £6,000,” she tells LandlordZONE.

“That’s less than six months’ rent for just one landlord. When they fail, it gives the whole guaranteed rent market a bad name.”

She believes that knowledge of the minimum standards, processes and systems, along with a good level of business knowledge, is not something that can be learnt from a weekend property training course.

“These are people who have entrusted their investment, often their pension or income top-up vehicle, so you need to have ethics and a sense of responsibility and consider how what we do benefits everyone,” explains Wendy.

TRGC is guaranteed by the government contracts it has negotiated, and always leaves 12 months’ rent in its business account so it has the ability to serve the correct notice to landlords and run to the end of term.

Temporary accommodation

Wendy is proud of its track record; operating since 2014 when she first used her own properties along with some from family and friends, it now covers Essex, Hertfordshire and Golders Green, supplying the temporary accommodation market by housing tenants waiting for a council house.

The average contract is three years; if a landlord needs their property back, they just give two months’ notice.

TRGC caters for portfolio landlords, those who have had nightmare tenants causing eviction headaches or regular late payments, and the landlords who own properties that aren’t in a condition to let, where it offers complete house and garden clearance, and full refurbishments.

Adds Wendy: “At the last house we took on, we removed two tonnes of rubbish and had it available again within three days so the landlord only had a weekend with no income.”

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Letting to a company who won’t vacate?

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Hi, We own an apartment which has been rented to a Portuguese company for four years, with no problems. The company’s business is in arranging accommodation for its clients.

However, the lease period expired on 25th March 2022

View Full Article: Letting to a company who won’t vacate?

Get Out While You Can

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Over the last week, an influx of Property118 landlords rushed to contact the team at Landlord Sales Agency – a company known for being experts in property portfolio exit strategies. The question wasn’t so much whether now was the time to sell our portfolios

View Full Article: Get Out While You Can

Proptech firm Goodlord gets huge cash injection to grow business

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Property software provider Goodlord has raised £27 million to fund the expansion of its products and services for agents, landlords and tenants.

The online platform – which automates the tenancy process, manages references and offers deposit replacement insurance – also plans to make more strategic acquisitions. It bought reference provider Vouch and tenant-facing bill-splitting app acasa in 2021 after winning £10m of capital in 2020. This round of funding was led by Highland Europe and supported by Columbia Lake Partners alongside existing investors Finch Capital, Latitude, and Oxx.

Tech academy

The new money will be used to increase the size of the firm’s product and engineering teams, so it can continue to grow its products and services built in-house, and expand its offering and value to letting agents through more integrations. Goodlord also plans to use the cash to launch its own tech academy, training entry-level software developers.

Goodlord has already supported more than one million landlords and tenants via its software and services, and currently processes more than £1 billion in payments each year on behalf of several thousand letting agents.

End-to-end lettings

Goodlord CEO William Reeve (pictured right) says it’s on a mission to build the best rental experience in the world. He adds: “Thanks to the backing and expertise of Highland Europe and Columbia Lake Partners, we can now increase the pace of our product development, new integrations, and acquisitions, and double down on our vision to facilitate an end-to-end lettings solution, which includes everything from property management, inventories, and move-in services, to insurance solutions and CRMs.”

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Union gets council on side to claim tenant campaign win

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Brent Council has signed up to a raft of commitments supporting renters that includes a push for borough-wide landlord licensing and rent controls.

Following campaigning by London Renters Union, Brent has vowed to ramp up enforcement action to make sure landlords carry out repairs and respect tenants’ rights, and are made to pay fines when they don’t. It will also take action against landlords that fail to provide warm, energy efficient homes, update its customer service charter and take action to support a number of union members in a dispute with their landlord.

Keeping promises

A public information campaign about renters’ rights and the London Renters Union will follow, while councillors will meet with union representatives regularly to prove they are keeping their promises.

A spokesman for London Renters Union says these changes could improve housing conditions for thousands of renters across Brent. “This is a huge victory for our members in Brent, who started organising just over a year ago and have been working tirelessly towards the recent negotiation with council leaders in recent months,” he says.  

Local elections

The union now hopes to win similar commitments in other boroughs across London and, ahead of the local elections in May, will hold events, protests, meetings and run street stalls, while promoting the issue through its social media campaign #SideWithRenters. It has labelled its work with Brent the first campaign win. The union spokesman adds: “We need councils to use their powers to hold landlords accountable when they break the rules, we need more social housing, we need councils to stop trying to force people out of their communities – and we need councils to join us in calling for rent controls.”

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The Guardian newspaper appeals to tenants – have you joined a tenants’ union?

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The concept of the tenants’ union is not a new one, tenants getting together and staging rent strikes dates back to the 19^th Century, and beyond, but the modern incarnation could in theory be more organised and widespread geographically, given the power of social media. But so far these groups are still disparate and disjointed.

A chequered history

One of the earliest instances of a British rent strike was the 19th century Great Dock Strike of 1889 when tenants withheld their rent in an ongoing battle against working conditions and precarious employment, with low pay.

This was followed in 1915 by the now famous Glasgow rent strike, organised by Mary Barbour, when tenants went on rent strike to protest the 25% rent increases proposed by private landlords. It led to the eventual introduction of rent controls during WW1, not removed for 85 years or so, enforced by the various 20^th Century Rent Acts, right up until the introduction of the shorthold tenancy in 1988.

The depression years of the 1930s saw further rent strikes in Leeds and London, organised by a Leeds Tenant Federation and a similar one in the East End of London. 1958 saw tenants in St Pancras London set up the United Tenants’ Association (UTA), a body that organised rent strikes and marches.

Tensions rose again in the 1960s involving violent riots and demonstrations, while the period between 1968 to 1973 saw a number of rent strikes organised by private tenants, with varying degrees of success. Around 11,000 London households withheld rent, and over 80 rent strikes and tenant protests took place across the country. One Liverpool strike lasted for 14 months and some protesters were imprisoned. The upheaval created eventually led to the passing of more legislation controlling rent rises.

Various student rent strikes have followed from the 1960s up to the present day, with varying degrees of success, but so far there’s been little in the way of major organised private renters’ strikes since those early days.

To the present day

The organisation of tenants into unions, as one might expect, is pretty disjointed given the geographical distances involved, diverse renter populations and the lack of awareness of unions by most tenants. However, there are three tenants’ unions that stand out today, having gained some traction:

– ACORN in a UK wide direct action union which claims to help tenants in the private and social sectors demand repairs, challenge bad landlords and letting agent practice, and stop illegal evictions

– The Greater Manchester Tenants Union claims to represent renters in the private and social rented sectors on issues such as deposits and repairs. It campaigns on safety matters and affordable housing.

– The London Renters Union is a campaigning union which takes action to win homes for people in need. It claims to help with issues such as stolen deposits, disrepair and eviction threats.

The Guardian appeal

The newspaper claims that the average UK rent has jumped by 8.6% in the past year, surpassing £1,000, they say, according to figures published this month, “while the cost of living crisis has meant many are struggling to heat their homes.”

Meanwhile, says the newspaper, “the number of no-fault evictions in England has been returning towards pre-pandemic levels, official figures published last November showed, despite government promises to ban the practice. There were 3,280 households in England put at risk of homelessness because of no-fault eviction notices between April and June 2021.”

The pandemic did focus students’ attention on rents they were paying, especially when not using their accommodation, so this period saw the largest wave of student rent strikes in four decades, as young people pushed back against hall lockdowns and paying for minimal in-person teaching.

The appeal:

“We want to hear from people who have joined a renters’ union in recent years. Why did you join? Did the pandemic impact your decision? Have you taken part in a rent strike, and if so, how did it go?” says The Guardian.

The newspaper is requesting contact by telephone or via a WhatsApp group following which one of their journalists will be in contact before publication.

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Detached property prices have performed best through the pandemic

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The latest Nationwide House Price Index shows UK house price growth surged to its highest level since 2004. Annual house price growth in March increased to 14.3%, from 12.6% in February with Wales remaining the strongest performing region and London the weakest.

View Full Article: Detached property prices have performed best through the pandemic

LATEST: Greenwich agrees £2.6m selective licensing scheme after Covid delay

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The London borough of Greenwich has re-started its planned roll-out of selective licensing across three of its key areas – Woolwich, Plumstead and Shooters Hill.

Expected to go live at the beginning of July following its Cabinet committee decision, this means nearly a fifth of PRS properties within the borough will have to be licenced within the borough, which already operates an HMO licensing scheme.

The scheme is expected to raise £2.6 million in revenue from landlords within the areas from approximately 4,500 properties.

During the delayed consultation, which was restarted in September 2020, 72% of the landlords and letting agents who contributed were against the scheme.

Greenwich council had hoped to bring in the measure – which will see all private landlords licence their properties within these areas – in 2020 but the plans were shelved during the pandemic after the government requested that new applications be set aside ‘due to pressure on the private rented sector’.

The plans have now been voted through by councillors and the fees for the five-year long scheme will be £312 for early bird applicants rising to £780.

Government approval

This scheme will not require approval by the Secretary of State as the threshold of 20% of private rented property covered by the scheme has not been exceeded.

During the meeting, it was claimed that the areas covered, which include a patchwork of residential streets near the centre of Woolwich, are both a hotspot of poorly-operated private rented accommodation but also blighted by anti-social behaviour.

But the meeting also heard that some HMO landlords had avoided licensing by returning properties to single-family use and that the selective licensing scheme would prevent this happening.

The neighbouring council of Lewisham is consulting on a scheme that would see an almost borough-wide selective licensing scheme introduced.

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