The Truth About Lease Options

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Video explaining the Truth About Lease Options:

I am joined by Simon Zutshi and together we explain how lease options are such a valuable tool in today’s market and how to make them work when investing in UK property.

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Lobby your MP about evictions ban, urges new campaign

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A joint campaign by the National Residential Landlords Association and Landlord Action is today urging readers to lobby their local MP and impress on them the huge problems created by the government recently extended evictions ban.

This includes asking them for a commitment to help the approximately 6,000 landlords stuck in the court system waiting for the eviction ban to lift on 23^rd August and unable to anything about tenants who have rent arrears dating from before lockdown or those behaving anti-socially.

Landlords are also being invited to attend a free webinar hosted by the two organisations to discuss the unfolding disaster for the sector, to be held on Wednesday 1^st July at midday.

Anyone wishing to attend can do so online and also email their questions to NRLA Chief Executive Ben Beadle, Landlord Action founder Paul Shamplina and Property Tribes co-founder Vanessa Warwick, who will be co-hosting the event. Details of how to lobby their local MP are available on the NRLA website. Questions need to be sent to policy@nrla.org.uk by 9am on the 1st July.

Sustain tenancies

“In most cases landlords and tenants are working hard to sustain tenancies wherever possible,” say Beadle and Shamplina in a joint statement.

“It is vital, however, that as courts begin to hear repossession cases again, that they prioritise the most urgent.

“This includes cases of anti-social behaviour, those where rent arrears were building pre-COVID and cases which were started, but then paused, prior to lockdown.

“To support this landlords have a vital role to play in telling their MPs about the impact the repossessions ban is having as well as highlighting the ways in which they are supporting their tenants through the current crisis.”

Landlord pain: David Healy

Healy is owed over £10,000 in arrears and his tenant has not paid any rent since November 2019. Mr Healy’s court hearing, which was due to take place on 5 May, has been adjourned and he does not yet know when this will be rescheduled for.
 

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Stop relying on landlords’ goodwill and protect tenants’ rights, leading campaigner tells government

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The pandemic has exposed an over-reliance on private landlords’ goodwill to meet the country’s housing needs, says Generation Rent’s new director Baroness Alicia Kennedy, who also says her organisation will be working harder to persuade more local authorities to introduce tenants’ charters.

“We are working with local councils to adopt a tenants’ charter to improve awareness of rights and underpin effective enforcement,” she says.

Several councils have already adopted these including Tower Hamlets in London, but their use is far from widespread.

Kennedy says tenants in overcrowded homes are at an increased risk of contracting coronavirus, while more than half of landlords are failing to offer their struggling tenants flexibility on rent.

“As we move from crisis management to recovery, the Government should act to rebalance our housing system, tackle the causes of unaffordability and ensure private renters are properly protected for the long term,” she says.

‘Suspend evictions’

Generation Rent is calling for a suspension of evictions for rent arrears built up due to coronavirus, as well as measures to prevent those arrears in the first place, such as lifting the benefit cap, expanding eligibility for housing allowance, and an increase in the level to cover average local rents.

“To make the sector work for growing numbers who are stuck in it, the Government needs to act quickly on its pledge to end no-fault evictions and introduce the Renters’ Reform Bill to parliament in the autumn,” she says.

“It’s the opportunity we need to give private tenants security in their homes, stability in their lives and greater power in their relationship with their landlords.”

Kennedy adds that while most landlords treat their tenants well, many are slow to carry out repairs or, even worse, let tenants live in unsafe accommodation.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Stop relying on landlords’ goodwill and protect tenants’ rights, leading campaigner tells government | LandlordZONE.

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Landlords received just 18.2% of commercial rent due on 24th June

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Commercial landlords are even worse off this quarter as swathes of retail chains across the UK are either withholding payment or only paying part of their rent.

New figures from Re-Leased show that landlords collected just 18.2% of commercial rents on 24th June – the most recent quarter rent date – compared with the 25.3% on March quarter rent day.

Its analysis of more than 10,000 commercial properties revealed that retail properties were the worst performing group, collecting just 13.8% of rent owed compared to 19.8% in the previous quarter.

Big high street chains including William Hill, JD Sports, Primark, Boots and Stonegate Pubs are all withholding their quarterly rental payments. Betting chain William Hill has written to landlords saying it won’t pay rent in June and is “unable to confirm when payments will recommence”.

Landlords have been trying to reach agreements with tenants after the Government extended a ban on statutory demands or evictions until the end of September.

Tom Wallace, Re-Leased’s CEO, says these figures illustrate the pressure both landlords and tenants are under.

He says: “Across all sectors, we have already seen landlords offering rent holidays, deferrals, and reductions where possible which is encouraging, but transparency is key. It’s crucial to remember that like tenants, landlords will be experiencing significant cash flow problems and have their own financial obligations to meet.”

Re-Leased’s analysis for the March quarter revealed that 67% of commercial rent had been paid 60 days after the deadline compared with 84% for the December 2019 quarter. Wallace believes rent collection will steadily increase over the coming weeks, but that it’s unlikely to reach the level seen in March.

Office assets have been the most resilient in the sector, collecting 22.8% of rent due. However, compared to March quarter when 31.2% was collected, it has seen the greatest decline with rent collection down 8.4%.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlords received just 18.2% of commercial rent due on 24th June | LandlordZONE.

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Quarter Days

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With high street administrations and missed rent payments becoming commonplace, commercial property quarterly rent payment days are currently being highlighted in the media, with the last one, June 24^th just having passed.

Understandably, these deadlines are causing landlords and tenants more than a few sleepless. Landlords want to maintain their cash flow as they either need to meet their borrowing obligations or they rely on rents for income. They also want to protect their investments and the last thing they want is a vacant property.

Tenants on the other hand have businesses to run and especially in retail, with high streets already suffering from an average drop in profits of around 30%, have their own challenges throughout the shut down, trying to keep their business afloat sometimes with no income coming in at all.

In England there is a long tradition that a standard commercial lease has rents paid quarterly in advance. The practice stems, like much property law, from medieval times. The Kings in those days would have their tax collectors tour around the country collecting taxes on the Christian holy days, so commercial rents took on the same tradition.

The practice is ingrained in the industry but increasingly business tenants are calling for change. They would like to move to a more cash-flow friendly system of paying monthly in advance, much the same as the practice that’s become the norm in residential tenancies.

Some of the big operators have already capitulated and moved to monthly payments for their commercial tenants, including The Crown Estate, but other landlords are resisting the move citing increased administration costs and arguing that their lenders (pension funds and insurance companies) will not switch as its a major condition of their loans.

So, what exactly is the history of the quarter days and when do they occur?

• The traditional English quarter days are: March 25, June 24, September 29 and December 25
• In Scotland the traditional quarter days or term days are: 28 February, 28 May, 28 August, 28 November.
• The modern quarter days: 1 January, 1 April, 1 July, 1 October.

From medieval times in England there have been in the calendar four Quarter Days:

• Lady Day
• Midsummer
• Michaelmas
• Christmas

Traditionally these have been days when accounts are settled, and typically with commercial properties these are the Rent Days.

The Quarter Days are the days that mark the beginning of each quarter of the year. In England, Wales and Ireland the quarter days are actually four religious festivals:

• Lady Day – The Feast of the Annunciation, March 25
• Midsummer Day – The Feast of St. John the Baptist, June 24
• Michaelmas – The Feast of St. Michael and All Angels, September 29
• Christmas Day – The Feast of the Nativity, December 25

In Scotland, the traditional quarter days are referred to as  term days:

• Candlemas – The feast of the Purification, February 2
• Whitsunday – Pentecost, which is always on May 15
• Lammas – Long Mass, or the Feast of First Fruits, August 1
• Martinmas – The Feast of St. Martin, November 11

However, recent legislation (Term & Quarter Days (Scotland) Act 1990 c.22) has specified the new Scottish quarter days as:

• Candlemas – 28 February
• Whitsun – 28 May
• Lammas – 28 August
• Martinmas – 28 November

These new quarter days will apply to more recent leases unless otherwise stated.

The modern quarter days now being adopted in England in some recent leases:

• 1 January
• 1 April
• 1 July
• 1 October

The Legal Tradition of Quarter Days:

The Quarter Days were traditionally days when debts were settled and when magistrates would visit outlying districts to administer their justice.

There is a strong principle of English justice tied up in this – “debts and unresolved conflicts must not be allowed to linger on” past the quarter sessions.

It was deemed that “However complex the case, however difficult to settle the debt, a reckoning has to be made and publicly recorded; for it is one of the oldest legal principles of this country that justice delayed is injustice”. On the Way to the Postmodern – see below.

When the Barons had the unjust King John sign the Magna Carta at Runnymede in 1215 one of the main principles embodied into it was the promise: “To none will we sell, or deny, or delay right or justice“.

Timeliness applies to this day where property rents are concerned: landlords and owners expect the rent to be paid on time.

Mnemonic – Quarter days 

Sir, Assuming you can remember when Christmas occurs, a useful mnemonic to place quarter days is to count the letters of the relevant months. Thus, in March, there being five letters, you can know that the quarter day is the 25th. June has four letters and the quarter day is the 24th, and September, having nine letters, has its quarter day on the 29th.(Letter to the Times G. C. M. YOUNG Fairford, Glos  – Times on-line 15 April 2006)

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‘We’re not out of the woods yet’ letting agents warn

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A survey of letting agencies has revealed that many believe that the private rental market will take a while to adjust to the ‘new normal’ as agents, tenants and landlords get used to renting homes during the ongoing pandemic.

And 40% of those canvassed told the Property Redress Scheme that they are yet to open their branches, not because they are worried about safety, but due to concerns over the viability of their businesses and risks of brining staff out of the furlough scheme too early.

“Whilst we have seen some encouraging signs of a market recovery, agents clearly feel we are far from out of the woods yet,” says Sean Hooker, Head of Redress at the PRS.

Uncertainty

“I’m also certain that the extension of the evictions ban and the uncertainty of the student market is also weighing heavily on letting agents’ minds.”

The survey also reveals that the lettings industry is set to change significantly following the Covid housing market lockdown.

The 230 letting agents revealed to the survey that 24% are to change their opening hours, 65% are to continue to let their employees work from home and that 44% are to relax their dress code.

The survey also found that virtual viewings are set to be a significant feature of the rental process. While only 20% of agents offered them prior to Covid, 70% of firms say they will now offer a mixture of face-to-face viewings and virtual ones.

Read the PRS survey in full.

 

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – ‘We’re not out of the woods yet’ letting agents warn | LandlordZONE.

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Be fair to student tenants, urges government as its shifts position

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The Government has urged landlords to consider whether they’re treating student tenants fairly by continuing to charge them for empty accommodation.

It’s a change to the previous stance adopted back in April, when Housing Minister Chris Pincher reassured landlords it wouldn’t take sides orforce them to waive rents for students, despite a vociferous campaign by the National Union of Students (NUS).

In a written question, Fabian Hamilton, Foreign and Commonwealth Shadow Minister asked the Secretary of State for Education what guidance the Government is giving student landlords about collecting rent on unoccupied accommodation.

Education Minister Michelle Donelan said: “While it is for universities and private accommodation providers to make their own decisions about charging rents to absent students, we encourage them to consider the fairness of doing so and to clearly communicate their policies to students.

Waive rents

“We are aware that a number of universities and large companies have waived rents for the summer term or released students early from their contracts.”

She added that tenants with individual private landlords could discuss the possibility of an early release from their lease and encouraged them to seek support firstly from the landlord.

Donelan reiterated that they should work together to put a rent payment scheme in place.

Students have lobbied both university and private landlords to release them from their tenancies and waive rents for the summer term.

The NUS has previously demanded that every landlord should offer students a no-penalty early release from tenancy contracts for the current and next academic year. Around the country, hundreds of university students have signed up to a rent strike.

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Come along (on your laptop) to Simon Zutshi’s free property conference

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Paul Shamplina is one of 11 speakers at the industry’s first totally virtual conference to take place during the crisis, on July 1^st.

The Virtual Property Exhibition is being organised by high-profile property investment guru Simon Zutshi and is free to register for, and watch.

Zutshi was one of the original property wealthy creation experts in the UK and began investing in property during 1995, claiming to have achieved financial independence by the time he was 32 years old.

Shamplina is to talk at 4.45pm on the day and will give those watching an update on how Coronavirus has impacted the property investment market including the suspension of evictions until September.

The other ten speakers include leading auctioneer Andrew Parker, finance guru Kevin Whelan, Mike Bristow of crowdfunding platform CrowdProperty, businessman Dan Hill and well-known industry lawyer Mark Smith.

The event will also hear from residential and commercial developer Ranjan Bhattacharya, who founded networking group the Baker Street Property Meet, along with investor/developer turned proptech pioneer Paul Davis, portfolio landlord Michelle Cairns and also Simon Zutshi.

“The sad reality is, that with many businesses closing, and people being made redundant, the UK will probably go into recession and we may see a drop in property prices,” says Zutshi.

“It’s not a good time to be selling, but potentially a great time to be buying, as long as you know what you are doing with the most up-to-date information.”

Get your free ticket here.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Come along (on your laptop) to Simon Zutshi’s free property conference | LandlordZONE.

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Labour peer joins Generation Rent as director to give it ‘more clout’

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Pro-tenant group Generation Rent has appointed a campaigning Labour peer as its new director who’s promising to give tenants a stronger voice.

Serving life peer Alicia Kennedy has resigned the Labour whip and will serve as a non-aligned member of the House of Lords so that she can focus on giving Generation Rent more political clout. 

A party stalwart, Baroness Kennedy was the party’s head of field operations for two general elections. She first worked as a regional organiser for Labour 25 years ago, ending up as an advisor to party leader Ed Miliband before joining the Lords in 2013.

Having previously worked on the Draft Modern Slavery Bill and on the Affordable Childcare Committee, Kennedy is a prolific poser of written questions to the House and a keen Lords debater.

She recently quizzed the Government about housing safety following the Grenfell disaster as well as asking them about the number of home owners at risk of negative equity or home repossession as a result of Covid-19.

Section 21

Generation Rent says she’ll be tasked with strengthening its team so it can focus on securing the abolition of Section 21 evictions, helping to enforce recent successes such as the letting fees ban and rights over safe homes, and ensuring everyone can afford a decent home. 

Kennedy says the Coronavirus pandemic, and the particular challenges it has posed for tenants, has shown the need for a strong national voice to campaign for the interests of private renters.

“It’s our job to give private renters a platform to share their experiences and to unite to tackle the common problems so many face,” she says. “Working together we can achieve positive change in policy and practice and deliver stronger rights for tenants. I can’t wait to get stuck in.”

Read more about Generation Rent.

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How should commercial landlords deal with the Coronavirus rent crisis?

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A cash crisis has hit both landlords and tenants as a result of the coronavirus pandemic, with many commercial landlords receiving thousands of pound less in rent and service charges payments than they they are legally entitled to.

Not only are tenants struggling to pay because their business is on hold, many smaller landlords are struggling to live because they rely on their rental income to fund their retirement – they are themselves under increasing financial pressure. Also, many large property landlords are struggling to avoid breaching their loan covenants.

What’s more, those unfortunate landlords who were already struggling with bad tenants, unable to pay their rent, have had their eviction claims put on hold. The government has shut down the courts and given tenants an eviction amnesty which could result in some landlords waiting many months to eventually get their properties back.

With millions of residential tenants on furlough or working reduced hours, and with housing benefit only covering around 30pc of average market rents, the crisis has forced many thousands of residential tenants into missing rent payments. It has been estimated that around £3m of residential rent arrears has built up already, and this figure is will only rise as more jobs are lost and savings are depleted.

With the arrival of the June quarter day commercial landlords are fearful that many tenants, some of who had previously come to arrangements with their landlords over reduced payments, will be faced with yet another crisis of whether to pay the rent or pay off other business priorities like wages.

The government to some extent has made thier decision easier because it has protected tenants from eviction, at least in the short-term. There will be other business priorities besides keeping up with the rent payments.

To try to help the situation for commercial landlord and their tenants the government in the guise of The Minister for Regional Growth and Local Government, Simon Clarke MP, has published a Code of Practice for Commercial Property.

It’s a voluntary code designed to help the relationship between landlords and tenants, all of who may be experiencing financial difficulties due to the Covid 19 virus.

It does not advocate non-payment when tenants can afford to pay. Those tenants who are able to pay should pay their rent in full, and continue to do so. But where tenants find themselves in genuine difficulty it is recommended that they get together with their landlords (social distancing of course) and it is expected that landlords will be flexible and provide whatever support they can.

The Code is voluntary and does attempt to change the law in any way regarding the legal relationship between the landlord and tenant. The Coronavirus Act 2020 moratorium on forfeiture, which the Government extending to 30th September, does change things somewhat, temporarily, but the contractual rights and obligations between the parties set out in a property’s lease still stand.

The code recommends that tenants set out their position to landlords in an open and transparent way providing documentary evidence where possible so that the parties may seek to settle on new temporary arrangements. In order for tenants to achieve concessions from their landlords they need to be clear as to why they are needed.

Landlords are being encouraged to concede concessions wherever they are able to and be similarly open and transparent if they are unable to do so. They should be prepared to set out clearly how and why they have reached their decision.

Although the government recognises that those sensible and reasonable landlords and tenants will already have been thinking along the lines proposed in the Code, it is thought that there is perhaps value in setting out clearly some of the options available to help with negotiations. These have been set out below and provided by the Code:

a. a full or partial rent-free period for a set number of payment periods

b. a deferral of the whole or part of the rent for one or more payment periods

c. the payment of the rents over shorter payment periods for a set time (e.g. monthly rather than quarterly) including provision for their payment in arrears

d. rental variations to reduce ongoing payments to a current market rate and/or to provide for all or part of the rent to be paid as a proportion of turnover of the site, incorporating any period during which the site was closed

e. landlords drawing from rent deposits on the understanding that the landlord will not then require that the deposits be “topped up” by the tenant before it is realistic and reasonable to do so

f. reductions in rent, either in whole or part, across other units occupied by the tenant and owned by the landlord, as part of a negotiated agreement applying to a portfolio of units

g. landlords waiving contractual default interest on unpaid rents or rents paid in arrears to make payment plans more affordable

h. provisions for ending the solutions on a fixed date, or on reaching the trigger point of particular circumstances

i. tenants and landlords agreeing to split the cost of the rent for the unoccupied period between them

j. any of the above in return for other arrangements e.g. a reversionary lease on reasonable terms, the removal of a break right in favour of the tenant, or an extension of the lease

Code of Practice for commercial property relationships during the COVID-19 pandemic

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