Borrowers warned that further interest rate hikes are coming

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A leading Wall Street investment bank has issued a warning that the Bank of England will need to raise interest rates to their highest level in more than 15 years to combat persistent inflation.

According to researchers at Goldman Sachs

View Full Article: Borrowers warned that further interest rate hikes are coming

Lenders pull BTR mortgages as Bank of England threatens more rate rises

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Landlords have increasingly fewer BTL mortgages to choose from as lenders withdraw products amid a rise in average fixed rates.

Moneyfacts reports that since the beginning of last week, the number available has dropped from 2,748 deals to 2,343 while the average rate on two- and five-year fixed BTL mortgages has surged to 5.61% and 5.52%, respectively.

Finance expert Rachel Springall (pictured) says average rates are expected to keep climbing because of the ongoing concerns over future interest rate hikes.

“We have seen a few lenders withdraw selected fixed mortgages from the market, at least temporarily. This volatility is down to the concerns surrounding future interest rate hikes, and lenders are reassessing their propositions,” she adds.

Lee Grandin (pictured, below) at Landlord Mortgages believes it’s a temporary situation and that lenders are repricing fixed rates, not withdrawing them for good.

“They may reissue products, but it might not fit many landlords because rates are so much higher – they can’t make it stack on a variable rate and now it’s hard on a five-year fixed rate,” he tells LandlordZONE.

“Maybe funding will have to shrink short term until lenders catch up.”

He adds: “You might find more products coming onto the market from lenders that aren’t PRA-regulated who might stretch the rules.”

Impact

Grandin admits that the current situation could have an impact on investors’ ability to finance their BTL properties. “A landlord doesn’t have much room to increase rent until the annual review, so they’ll have to survive this tight cycle.”

The news follows reports that the UK’s housing market is showing signs of stress. Figures from Nationwide reveal that house prices fell in May at an annual rate of 3.4%, representing the sharpest fall since July 2009 when the British economy was dealing with the fallout from the financial crisis.

Read more about mortgages.

View Full Article: Lenders pull BTR mortgages as Bank of England threatens more rate rises

What do the falling house prices mean for landlords?

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May has brought more bad news for some landlords with the Nationwide Building Society reporting a 3.4% drop in house prices in the year to May ’23 and interest rates that are expected to rise to 5.5.% later this year.

View Full Article: What do the falling house prices mean for landlords?

HMO landlord loses landmark appeal against ban and £22,000 fine

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A rogue landlord has lost a landmark case after she failed to convince an Upper Tribunal to overturn her banning order.

Naomi Knapp, 62, who owns 29 properties in Bristol of which 18 required licencing, was convicted of eight banning order offences relating to poorly managed HMOs last August and was added to the government’s rogue landlord database. One of the orders related to a property on St John’s Lane (main picture).

Following a case brought by Bristol Council’s private housing team Knapp, who has been a landlord for almost three decades, admitted the offences and was fined £22,000 in April 2021 along with £7,000 costs.

A First Tier Property Tribunal made the decision to ban Knapp after it heard about missing or inadequately installed fire doors and damaged and poorly maintained walls and ceilings. Fixtures and fittings in the communal areas of the properties were also damaged and badly maintained, and many properties featured rubbish-strewn gardens.

But Knapp was then granted permission to appeal on six grounds, but each appeal was dismissed in the landmark case; the first time the Upper Tribunal has heard an appeal against a banning order under the Housing and Planning Act 2016.

Seriousness

Judges ruled that the original tribunal had correctly assessed the seriousness of the offences and had also correctly concluded that banning orders were capable of applying to existing tenancies, rather than applying only to the initial act of granting a tenancy.

Her failure to follow up on her proposals to improve issues demonstrated her unwillingness to change matters for the better and her acceptance of the risk that her management of the properties might be below the required standard.

It said: “The Tribunal is satisfied that the Respondent has flouted her legal obligations in respect of the management of her property portfolio and has rented out accommodation which was substandard, and that the Respondent has failed to
follow up on her agreements with the Council to improve the management and conditions of her properties.”

Important case

Councillor Tom Renhard (pictured), cabinet member for housing delivery and homes, says it’s an important case for Bristol Council, and the first of its kind in the country.  

“We are working hard to make sure that people living in private rented accommodation have adequate protections and decent living standards,” he adds.

“We will take action to crack down on criminal landlords who do not meet the legal requirements for a safe and secure living environment.”

Main picture: Google Streetview

View Full Article: HMO landlord loses landmark appeal against ban and £22,000 fine

‘Reform bill misses point – we need more affordable rented homes, not regulation’

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Rent reforms won’t work until the real problem of affordable housing waiting lists is addressed, according to leading property expert Kate Faulkner.

Although MPs are focusing on the PRS, the housing crisis is nothing to do with the private sector, believes Faulkner, who suggests that building at least one million social homes would remove the people on housing benefit and free up homes in private sector.

“What if we could incentivise 50,000 investors to build two homes to hand over to the council each year? We should work with the private sector which is currently taking the strain from a lack of social homes.”

Speaking to Sean Hooker (pictured), head of redress at the Property Redress Scheme, on the latest episode of The Property Cast, Faulkner also voiced doubts that removing Section 21 would make any difference.

“What will happen is we’ll know the main reason it was issued was either for rent arrears, anti-social behaviour or to sell – it will just clarify that it was never a no-fault eviction.”

Too late

She added that the laws in the Renters (Reform) Bill are coming too late, and with no announcement about how extra enforcement will be funded.

“HMO licensing has already been tested – that’s failed and cost lots of money. In London there are 2.2 people enforcing 10,000 PRS properties and enforcement takes too long. As we’ve got so little stock, tenants can come out of a property quicker, but they’ve got nowhere to go.”

She reiterated her belief that the government can only address issues by introducing legislation pre-tenancy, to stop bad landlords, agents and properties coming onto the market in the first place – not post-tenancy.

“For example, if they’d introduced the Regulation of Property Agents legislation as promised to train agents in law…and said properties needed to have an MOT, we’d already have been 75% there.”

Read more about the bill.

ViDEO SHORTS: Watch Kate talking about the Renters (Reform) Bill

View Full Article: ‘Reform bill misses point – we need more affordable rented homes, not regulation’

House prices slip again – interest rates to remain high

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House prices have fallen by 3.4% in the year to May – which is a bigger decline than the drop of 2.7% seen the month before, Nationwide reveals.

The data also shows that prices edged down by 0.1% last month

View Full Article: House prices slip again – interest rates to remain high

Renters choose Netflix over contents insurance

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A study has found that while 53% of private tenants subscribe to a TV streaming service like Netflix, only 51% have contents insurance for their rented homes.

The findings from general insurance provider Paymentshield, highlight that this proportion increases to 60% for those aged between 25-54.

View Full Article: Renters choose Netflix over contents insurance

REVEALED: Slipping standards at Build-to-Rent blocks as sector balloons

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The burgeoning build-to-rent (BTR) sector has been warned not to rest on its laurels as new research reveals slipping customer service standards.

Consultancy hereSAY’s BTR Mystery Shopping Benchmark Report found that although the developments still present high-quality amenities, apartments and communal areas, a decline in customer service at the enquiry and viewing stage could damage the reputation of the brands and buildings long term.

Its surveys at 50 BTR developments reveal that 28% of people received no response to their enquiries, 68% rated their experience of contacting the scheme and attempting to book a viewing as poor or very poor, while 36% had received no follow-up in the seven days after their viewing.

In contrast, the presentation of the apartments, amenities and communal areas was the highest rated part of the experience, scoring 88% – an 11% increase from 2021.

Investment in the BTR sector almost doubled last year, helping to fill the gap left by exiting residential landlords, according to the British Property Federation, which reports that 180 local authorities have now completed BTR homes, or have units in the pipeline, up 29% on Q4 2021.

Attention to detail

Five years ago, the BTR market had to work hard for its residents, and as such the customer service and attention to detail was exemplary, explains Debra Yudolph (pictured), partner at hereSAY.

“With the ‘race to rent’ demand far exceeding supply, people have less ability to shop around, so the BTR sector hasn’t had to work as hard and unfortunately, we have seen a significant dip in customer service at the enquiry stage,” she adds.

“If the sector wants to continue to grow at the rate and popularity it has to date, it cannot be seen to shun prospects simply because so many people need somewhere to live.”

Read more: What does BTR mean for BTL?

Read the report in full.

View Full Article: REVEALED: Slipping standards at Build-to-Rent blocks as sector balloons

How do I make sure my commercial rental property is properly maintained?

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Regular Inspections: Conduct routine inspections of the property to identify any maintenance issues or potential problems. Check for leaks, cracks, signs of wear and tear, malfunctioning equipment, and safety hazards. Address these issues promptly to prevent further damage.

Without proper maintenance any commercial property will gradually fall into disrepair. It will cost far more to repair a neglected building – a stitch in time. Without a proper maintenance plan and regular attention the building will decay and it will cost far more in the long run.

Business tenancies tend to be long: 5, 10 or 15 plus years, so it’s important that commercial landlords have some control over repairs and maintenance.

Good commercial tenants will want to keep their property in good repair because a run-down building will have an adverse effect on their business, especially when their customers are visiting the building.

But being tenants and not owners of the building there is often a reluctance to spend money on it: that’s why the commercial landlord must have a strategy for making sure necessary repairs are carried out.

The commercial lease

The key to this process is the lease, and the maintenance clauses it contains. Unless the lease is a short one, under six months, the ideal for a commercial landlord is to let the building on a full repairing and insuring (FRI) lease.

This is the traditional institutional lease where the owner has a clear unencumbered return on the investment – the tenant pays for everything, including insurance, safety checks, repairs and reinstatement at the end of the lease term – see dilapidations.

The lease should include a Schedule of Condition which records in detail the condition of the property at the commencement of the lease term, usually drawn up by an independent party – a chartered surveyor. The schedule, whether provided by the landlord or the tenant, is then agreed at the outset by both parties. It’s a reference point for reinstatement when it comes to drawing up a Schedule of Dilapidations.

Self-contained buildings

Where the tenancy is for a self-contained building – that is where the tenant occupies the whole building – maintenance responsibilities are somewhat simplified. Usually, the landlord supplies the building in good tenantable repair, as per the Schedule of Condition, meeting all the applicable regulations such as planning use, electrical, gas and fire safety.

From then the responsibility – if the lease is properly drawn up – lies with the tenant to maintain the building and comply with all the necessary regulations, and return the building in a well-maintained tenantable state. If not, the landlord has recourse to the dilapidation’s procedure.

Multi-occupied buildings

A multi-occupied building presents more of a challenge and more work for the landlord. As no one tenant can take responsibility for the whole building the landlord or his managing agent must coordinate and arrange for the necessary repairs using a maintenance schedule. For example, annual gas checks, 5 yearly electrical system checks, annual fire alarm and fire equipment checks and servicing, painting every 7 years etc.

Generally, the tenant will be responsible for their own internal repairs and decorating, workplace safety etc, while the landlord will be responsible for the external structure – roof, walls, windows and doors – and the common areas.

The Responsible Person

Fire safety is the big issue here. The law places responsibility for fire safety in the building as well as the safety of occupants, workers and visitors in the hands of “The Responsible Person”. In practice, in this type of multi-occupied building, this responsibility is usually shared between landlord and tenant along the lines outlined above – the tenant (employer) in relation to a workplace and internals, and the landlord / agent for externals, safety checks and common areas.

Either the person who has control of the premises (managing agent) or the owner along with the tenant will be responsible where the premises is not a workplace, such as an unmanned storage warehouse.

In addition to the gas safety and electrical safety checks, the Regulatory Reform (Fire Safety) Order 2005 imposes various duties on the “responsible person” with regards to fire safety in commercial properties.

Duties under this Order include, but are not limited to, arranging general fire precautions to ensure that certain people are safe in the event of a fire, carrying out a fire risk assessment and keeping this under review.

It’s a good idea to have an initial risk assessment carried out by a fire consultant, a specialist who will draw up a detailed scheme. This can either be repeated every 12 months by the specialist, or simply reviewed by the landlord or agent.

Regular inspections should be carried out and documented to ensure that in the whole premises, fire alarms are served and tested weekly, all fire safety equipment is easily accessible and serviced annually, and that fire doors, emergency escape routes and exits are properly maintained and kept in working order.

A “responsible person” found guilty of non-compliance with the Order will be liable to a fine and, in the most serious cases it could mean imprisonment if proceedings are brought in the Crown Court.

General Commercial Property Maintenance

Modern buildings have systems which need regular maintenance. HVAC Systems, heating, ventilation, and air conditioning (HVAC) systems are all essential for comfortable occupation and efficiency. Schedule regular maintenance for HVAC units, including filter replacement, cleaning ducts, and inspecting for any issues. This will ensure optimal energy efficiency and reduce utility costs.

Service charges and disputes

When a landlord sticks to a regular maintenance plan to keep the property in a good state of repair as per the schedule of condition, and without undertaking unnecessary work, most tenants will appreciate this as it enhances their business.

However, experience shows that some tenants, especially if their business is struggling, will resent having to pay out money for repairs, maintenance and groundworks on top of their annual building insurance charges. Usually, the landlord will finance the repairs and maintenance and apportion the costs between the tenants in the building according to a formula set-out on the lease – usually based on occupied floor area.

When disputes arise, often because the tenant is arguing about the necessity of the work or that there is excessive cost of repairs, it may be necessary to follow up with court action. Landlords cannot afford to allow one tenant to avoid paying service charges while others are paying in full.

In some cases it may be possible to resolve disputes without resorting to the courts through a process of independent mediation, but if a stalemate is reached it may be necessary for the parties to agree to an independent assessment of the work by a qualified third party, i.e., a chartered surveyor.

Schedule inspections, safety checks and maintenance

Set a schedule for weekly, monthly, and annual tasks using a checklist, and make sure that these are carried out with any work identified as needed to be carried out without delay. don’t put off minor repairs or safety issues as they can turn into major issues over time.

Don’t forget externals such as drives, paths and outbuildings which can represent safety issues for which the responsible person is responsible for. Roads, potholes, pavements and pavers out of place can all cause safety hazards for vehicles and people coming to the property.

Prevent Pest Infestations

There’s another issue that regular inspections should identify and that’s pest infestations that can easily get out of control. Just like neglected maintenance issues, the longer this goes on, the worse it can get. With a serious outbreak you may need a pest control specialist to deal with the problem.

Conclusions

There’s quite a bit of work involved in keeping on top of tenancies in a multi-occupied building, making sure the building is kept in tip top condition and ensuring that you are meeting the critical safety regulations.

There’s a lot to schedule in, so you might consider using a professional managing agent to take on some of these responsibilities. This will cost money but it has the advantage of having an independent person to decide what’s required, and that may be more acceptable to your tenants.

View Full Article: How do I make sure my commercial rental property is properly maintained?

PICS: Dawn raid in London reveals ‘shocking and horrifying’ illegal HMO

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Eleven tenants have been found crammed in a squalid and illegal HMO during a dawn raid on a three-bedroom house in Wembley.

Following a tip-off from residents, Brent Council’s housing enforcement team and police entered the semi-detached property in West Hill early one morning where tenants were sleeping in every room except for the kitchen and bathroom.

Officers reported disgusting conditions during their inspection, including a polystyrene ceiling giving way inside the kitchen, no fire safety doors and no fire alarm system. Damp and black mould also covered the walls and ceilings inside the rooms.

Tenants told Brent’s licensing enforcement team that they were paying a combined rent of more than £2,000 to their landlord.

Councillor Promise Knight, cabinet member for housing, homelessness and renters’ security, promised to hold the owner to account.

Slum-like

“It is shocking and horrifying that rogue landlords make a profit from keeping people in dangerous and slum-like conditions like this,” she says. “People in vulnerable circumstances tend not to know what rights they have as renters. Rogue landlords who exploit their tenants’ vulnerability will find themselves facing hefty fines and possibly a criminal conviction.”

Last month, Brent Council agreed to bring in a selective licensing scheme in three wards – Dollis Hill, Harlesden & Kensal Green and Willesden Green – from 1st August following a borough-wide consultation. 

Plans for an alternative expanded scheme covering 21 wards got the thumbs down from 75% of landlords and 46% of residents.

Comments widely viewed the larger scheme as an addition financial burden on the PRS, some describing it as a ‘money grab’, ‘cash grabbing’ and a ‘cash collecting’ scheme, the council’s consultation results revealed.

Read more: Complete guide to letting an HMO.

Pics: Brent Council

View Full Article: PICS: Dawn raid in London reveals ‘shocking and horrifying’ illegal HMO