Reluctant landlords: cladding woes force owners to let out properties at a loss

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Thousands of leaseholders are stuck in their flats because they cannot sell due to unsafe cladding installed on their high rise blocks. Sales are stalled because potential buyers can’t obtain a mortgage until the defective cladding is replaced and the building declared safe by a specialist engineer.

In desperation “trapped” sellers, many of whom are young couples wanting to start families, or wanting to move away for their work, are resorting to letting out the flats at a loss.

They are then forced into renting elsewhere, or buying a smaller and cheaper property than they would otherwise have gone for. Property experts say the situation is so common and so serious that with so much wealth tied up in unsaleable property, it is reducing demand and depressing prices further up the housing ladder.

Flat owners are having to become landlords or so called “accidental landlords” costing them hundreds of pounds a year in addition to their alternative housing costs. This is because the rent they can earn on their flats does not cover their mortgage and service charges.

In additional, they have the constant threat hanging over them that at any time they could receive a hefty bill running into thousand of pounds to fix the unsafe cladding.

A further issue for owners in this position is, they need permission from their freeholder and from their mortgage lender to let out their properties. What’s more, potential tenants will be urged to check out the fire safety situation of the building they are considering renting. There’s an obvious concern that they could be unknowingly signing contracts for potentially unsafe flats.

This could leave accidental landlords with vacant homes, plus they have a further risk that if tenants leave and they have a long void period they could find themselves in financial difficulties.

According to The Daily Telegraph Dr Lucy Coyne, 34, a vet, wanted to sell her flat in Liverpool to buy a house in Nottingham with her partner. But multiple sales attempts have fallen through due to the cladding issues.

So Dr Coyne was forced to rent out her flat, but the monthly rental income does not cover her mortgage and the building’s service charges and she expects to lose £600 every year until the cladding problem is resolved.

“I don’t want to be a landlord,” she told The Telegraph, “I’ve never wanted rental properties and I don’t want the stress of it”, plus she has the added cost of time spent managing and maintaining the property she no longer wants to own.

“My partner and I want to buy a property together in Nottingham, but we can’t because all my cash is tied up in my flat. Every time I think about the flat I just get anxiety and stress.”

There are significant costs and complications to becoming a landlord, and not everyone wants it is is prepared for it.

There are the additional fees mortgage companies sometime demand for letting, fees for energy performance certificates, legionella risk assessments, electrical and gas safety reports, smoke and carbon monoxide alarms, plus any upgrades needed to make the property suitable for rent. There may also be income and capital gains taxes complications to deal with.

All this not to mention dealing with agents or letting and managing the property yourself.

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43% of landlords say Covid risk still too high to complete face-to-face viewings

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Forty three percent of landlords have told LandlordZONE that they will not conduct viewings during the Covid lockdown at their rental properties.

Our Twitter poll, which was launched just before England’s lockdown was announced and closed yesterday, garnered 2,503 responses to the question ‘will you feel comfortable allowing viewings in your property during lockdown?’.

This reflects somewhat mixed messages from the government which, on the one hand, has said property viewings can proceed during the lockdown – provided these are undertaken in line with public health advice and the relevant Covid legislation – but on the other hand says ‘tenants’ safety should be the priority of letting agents and landlords’ and that viewings ideally should be virtual.

Virtual viewings

Research out today from 43-branch agency Andrews has revealed that a third of its viewings were conducted online rather than face-to-face last month.

This chimes with government guidance that urges, where possible, virtual viewings should be used before visiting properties in person in order to ‘minimise public health risks’.

“Landlords must follow sensible precautions to keep themselves safe when they or contractors or others are visiting the property,” the guidance says.

David Alexander (pictured) of lettings platform Apropos says: “Virtual viewings, as a concept, would have been laughed at a year ago but are now the norm.

“Our business has experienced a substantial increase in activity in the last four months with the number of new properties coming to our business achieving a record high.

“All of this was done online, and our new landlords and tenants were happy to work this way.”

Read more: Everything landlords need to know about Covid.

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Give students a rent rebate during Christmas, NUS leader asks landlords

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Students should get a rent rebate for leaving their accommodation early before the Christmas break, says the National Union of Students (NUS).

It’s calling on university providers and landlords to compensate the thousands of youngsters who’ve been told to go home during the ‘travel window’ between 3rd and 9^th December, just after lockdown ends, in order to reduce any transmission risk.

NUS president Larissa Kennedy (pictured) says those who follow this guidance should get some money off their rent.

“Now that it is clear students will be expected to leave term-time accommodation earlier than usual, we believe students who leave in the advised timeframe should receive rebates for the weeks they will not be in their accommodation,” she says.

Students have voiced fears about losing money from their part-time jobs and being able to afford monthly bills.

There is also concern that those who test positive for Covid in early December could struggle to shop and eat if they’re living alone, with the NUS urging that wellbeing support and free food should be available for them, including those in private housing.

Earlier this term, Glasgow University and Manchester Metropolitan University students who were locked down in purpose-built halls due to a spike in coronavirus cases, were given a rent rebate.

Last term, the Government urged landlords to consider whether they were treating student tenants fairly by continuing to charge them for empty accommodation – although this was for a much longer period.

Read more about rent rebates for students.
Read more: What does Covid mean for student landlords?

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Renting Vs buying a home in 2021

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If you are a property investor, should you buy or rent your own home?

This topic has been discussed quite a lot over YouTube recently and in this video I share a checklist of ten points that you should consider to arrive at the best decision for you!

The post Renting Vs buying a home in 2021 appeared first on Property118.

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Housing benefit causing young to choose between rent debt and health

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Young people are being forced to choose between racking up rent debts and risking their health due to rules limiting what they can claim for housing benefit. Those under 35 who are now relying on benefit to pay their rent for the first time will find that support will only be available to cover the cost of a room in a shared house.

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HMO landlord fined £70,500 after failing to upgrade properties in ‘shocking’ condition

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A rogue landlord who failed to repair her two run-down HMOs which had to be shut down, has been handed a £70,500 fine.

Lystra Dorval, of Oaks Lane, Ilford, was given ten penalty notices for poor management of the properties in Hayes Road, Clacton, where tenants endured a catalogue of faults, including blocked fire escapes, broken staircases and toilets, and dangerous electrics.

They reported being threatened with eviction for pointing out the problems, while neighbours also complained about anti-social behaviour and the properties’ poor condition.

Tendring Council in Essex gave Dorval a list of works to complete and a few months later told her to immediately repair the fire alarm.

Housing officers shut down the bedsits using an Emergency Prohibition Order and rehomed her tenants two days later when the work hadn’t been done.

Gas leak

The next day a gas leak and flooding were found after pipework was stolen, and during clear-up work further damage was revealed including floors at risk of collapse, drains blocked with rubble, and rotting waste.

Following “slow and unsatisfactory” progress on repairs to the building, enforcement notices were issued, and Dorval had her licences removed as the council said she was no longer a fit and proper person to run the HMOs.

She appealed, but a First Tier Housing Tribunal has now reached a similar decision, although it did reduce her original fine from £90,000 set by the council.

Paul Honeywood (pictured), Tendring councillor responsible for housing, says the case sends a strong message to landlords.

He adds: “We work closely with landlords as the vast majority want the same thing – a decent property which is good for the tenant and provides them with rental income. Sadly, this was not the case here.”

The property had been operated as a care home by Dorval for nearly three decades until 2014/15 before being investigated by the Care Home Commission and eventually shut down. It was then converted into two HMOs.

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Top fund manager says Real Estate Investment Trusts offer exceptional value…

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Star fund manger Nick Train’s Lindsell Train UK Equity Fund has produced a total return of 352% since its launch in 2006, compared with an 83% return for the FTSE All-Share.

The Finsbury Growth & Income Trust that is also managed by Train has performed equally as well, producing a 65% return for its investors over five years to 31st August, compared to 17% for the FTSE All-Share index.

The famously long-term buy and hold investor has held many of the stocks and funds in his portfolios for over ten years, but recently he’s been on something of a buying spree, taking new stakes in soap manufacturer PZ Cussons, drinks firm Fever-Tree, and credit rating agency Experian.

Train’s latest quarterly report for investors in the Lindsell Train UK Equity Fund makes for interesting reading, noting in particular that he thinks a number of property-based investments – especially Real Estate Investment Trusts (REITs) – look oversold right now, and he’s been taking advantage.

Since the end of September, for instance, he’s taken positions in Supermarket Income REIT, the Schroder Real Estate Investment Trust, HICL Infrastructure, and Regional REIT.

Despite the turmoil caused by Covid-19, says Train, investors in the UK are really spoiled for choice right now, though he does stress the importance of steering clear of the worst-hit sectors, such as travel and hospitality. Even the most conservative of investors is likely to find stocks with obvious appeal, he says:

“I genuinely believe this in part reflects the long period of disappointing absolute and relative returns delivered by the UK stock market,” Train writes.

“It’s simply that more opportunities are being presented to us as other investors give up on the UK. I don’t exaggerate when I say ‘give up’: have you seen the industry data showing monthly outflows from across all UK equity funds? They are substantial and sobering.”

In other words, thinks Train, a bit of a valuation gulf has opened up between what global investors are valuing UK stock market at, and Train’s own view of prospects the UK has to offer, particularly the kinds of high-quality UK stocks that he traditionally goes for.

Despite his reputation for his investing patience, at times “sitting on his hands” for many years on his favoured investments, with little by way of trading action, he now sees many opportunities in the market that are too good to miss. He will likely be making more purchases for his funds in the months ahead. That increased activity for Train includes property investments.

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BREAKING: Landlord mortgage arrears jump by 19%, latest lender figures reveal

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The number of landlords with buy-to-let mortgages in arrears has leapt by 19% over the past three months, latest figures from UK Finance reveal.

The organisation, which represents the UK’s mortgage lenders and personal finance firms, reveals that there were 5,400 buy-to-let mortgages in arrears last quarter owing more than 2.5% of the outstanding balance.

Of these, 1,350 were more serious arrears owing 10% or more of the balance.

Jonathan Harris, managing director of mortgage broker Forensic Property Finance, says: “The uptick of buy-to-let mortgages in arrears is from a low base, with the overall picture suggesting current levels remain lower than in previous years.”

UK Finance says this is largely down to the ‘mortgage holiday’ its members have offered struggling landlords, and the moratorium on repossessions enforced during the pandemic.

Repossessions

Just 230 buy-to-let mortgaged properties were taken into possession in the third quarter of 2020, 71 per cent fewer than in the same quarter of the previous year.

“Following the industry moratorium on involuntary possessions, these low possessions numbers in Q3 2020 for the most part reflect cases where the customer requested the possession to go ahead or where the property was vacant,” says UK Finance.

Harris adds: “The past few months have been difficult for landlords, however, with evictions put on hold, and many may be tempted to sell up once they have an opportunity to do so.”

But however worrying the leap in arrears may seem, the situation for landlords remains mild compared to the darkest day following the global financial crisis, when an estimated 14,000 buy-to-let mortgages were in arrears.

Read more about Coronavirus and the PRS.

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CGT REVIEW proposals discussion LIVE on YouTube at 1:15pm this afternoon

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The Office of Tax Simplification has published its proposals to Chancellor Rishi Sunak in regards to CGT.

A link to the 131 page document can be found HERE.

The Breaking News Live video will be hosted by Ranjan Bhattacharya and myself.

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LATEST: New student Covid rules risk chaos in shared houses during mandatory tests

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The National Union of Students (NUS) has called for more support for students who test positive for Covid in private accommodation before the Christmas break.

New Government guidance on plans for the mass testing of students so they can travel home once national restrictions end on 2nd December, means if someone tests positive before they leave they’ll need to self-isolate for ten days. 

It says that moving all learning online by 9th December gives these students enough time to isolate and still get home for Christmas.  

Under current guidelines, their housemates will have to isolate too, however, if they’re living alone – particularly in an HMO – it could be a challenge to shop and feed themselves.

The Government advises that isolating students living in HMOs should discuss their circumstances with both their landlord and their college, who should, “work in tandem to ensure that necessary support is in place”.

However, the NUS says following massive lockdowns in student halls, students are unsure as to who counts as their household in cases of isolation. It wants clear and supportive guidance alongside the mass testing programme.

NUS President Larissa Kennedy (pictured) says: “We have seen universities try and get away with some shocking behaviour, including charging over £200 for a fortnight’s food for students.

Students deserve better than being extorted while they are vulnerable; it’s vital that they get wellbeing support and free food if they are unable to leave their accommodation – this includes those in private housing.” 

Despite universities’ best efforts, many students contracted the virus within days of arriving on campus earlier this term. An estimated 40,000 students have become infected while in their university towns, leading to thousands having to isolate.

Read more about student accommodation.

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