Why landlords are seeking out sitting tenants amid the Covid confusion

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In recent months there has been a noticeable increased demand in the BTL investment market for tenanted properties, this could be linked to the fact that tenants are renting for the longer term now and regarding properties as their home rather than a stop gap.

Leeds and Bristol showed the highest increase in demand with 55%, closely followed by Nottingham 51%, Cambridge 47% and Southampton with a 40% increase in demand.

However, the market is slow to catch up with demand, with Leeds only having 2.9% of properties on the market which are tenanted, Bristol 0.7%, Cambridge 1.8% and Southampton 1.6%.

In contrast Cardiff has the highest number of tenanted properties on the market for sale at 3.7% with a demand increase of only 38%.

Buying a property with a tenant in situ also referred to as a sitting tenant, can bring a number of benefits to the BTL investor.

Void free?

Firstly, there will be no void period after the sale when you would normally be advertising for a tenant, this in turn will mean a saving on agency fees.

You inherit a reliable, trustworthy tenant which is extremely valuable to any landlord and you are guaranteed rental income from day one, you will be able to budget with confidence, knowing the rent you will receive until at least the end of the existing tenancy agreement in addition you will have access to the tenants full rental history something you may not get when using a referencing firm with a new tenant.

With a contract in place, tenants need not be affected at all by a change in the ownership of a rental property, ensuring their happiness and willingness to remain in their home is undiminished.

But it isn’t as simple as it sounds, nothing in property ever is.

It is important to remember when buying with a tenant in situ, the tenant will be entitled to continue to live in the property and the change of ownership does not override the tenancy agreement and the tenant’s rights.

You will not be able to evict or increase rents until a fixed term tenancy ends and depending on when the tenant took up occupation, you may find you have a Protected tenancy which brings its own problems

Buying a property with tenants in situ is different to the normal sales process and will need a conveyancer with commercial experience.

Extra care is needed as in addition to the standard enquiries that need to be made in all conveyancing transactions, it is critical to make enquiries about the tenants.

It is important the seller provides all the details relating to the tenant, including the Tenancy Agreement this is key to establish when the tenancy was created, the status of the tenants and how they may be regulated by legislation, as different forms of security apply to different tenancies.

You will also need to ensure the seller has been compliant and how this will impact you as the buyer, checking the original deposit has been registered and after the sale transferring it to your name, you will need to protect it again, and reissue the prescribed information.

Making sure the property meets safety regulations and all the necessary certificates are in place, such as energy performance, gas and electrical.

(if furnished) that the furniture is in an acceptable condition and meets safety standards.

In an industry where there is a notice for just about everything, it is important to familiarise yourself with the notices and their timelines that will need to be served on the tenants once the property is purchased.

Section 3 of the Landlord and Tenant Act 1985

Section 3 places a mandatory duty on a new landlord to tell the tenant that they are in fact the new owner, having taken over from the old one, this is still the case even if the seller has already informed the tenant.

The new owner must give this notice no later than next rent due date or 2 months from the date of sale, it must inform the tenant that they are the new landlord and must provide their name and address (this must be the landlord’s actual address, not just an address for service of documents).

Important caveats

If the new landlord has not served a S3 notice on the tenant then the previous owner remains liable for any breaches of the tenancy agreement, such as disrepair, until the notice is given, in addition  both the old and the new landlord can be held jointly and severally liable for any breach.

More importantly S3(3) states A person who is the new landlord under a tenancy falling within subsection (1) and who fails, without reasonable excuse to give the notice required by that subsection, commits a summary offence and is liable on conviction to a fine not exceeding level 4 on the standard scale.

In short this means being prosecuted in the Magistrates court and the scale 4 fine is currently £2,500.

Section 47 of the Landlord and Tenant Act 1987

S47 requires that any written demand for rent by the landlord to the tenant, must include the landlord’s name and residential address and if that address is not in England and Wales, an address within England and Wales is required, so notices can be served. The purpose of the requirement under Section 47 is not to give the tenant information as to where the notices can be served, but to confirm the identity of the landlord. Using a managing agent’s address does not confirm the landlord’s identity, as it is not the landlord’s actual address.

Section 48 of the Landlord and Tenant Act 1987

Section 48 of the Act prevents landlords being able to seek possession of the property on grounds of rent arrears until the tenant has been provided with an address at which notices in proceedings can be served and the tenant will not be liable to pay rent until the landlord complies.

Interestingly S48 does not state that the landlord’s personal address is required for the amounts to become due. So a landlord can seek possession of a property on rent arrears grounds or the arrears themselves if he has provided an address at which notices and proceedings can be served. This address can be the landlord’s own address, that of the landlord’s letting agent, solicitor or friend. The address can also be a business address, preferably a registered office.

Finally, if a tenant has already paid rent on a defective rent demand, he or she may well be able to claw back up to six years’ payments on the basis that they were paid under an invalid demand.

Visit the HSPN website.

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COMMERCIAL: Why the big four property giants read the runes wrong

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The big four property landlords came a cropper because they mis-read the way the market would go; this to the benefit of the private equity giants, but to the misery of the shareholders. This however, was not at great cost to themselves, in fact they are well rewarded for their failures.

British Land, Land Securities, Hammerson and the now defunct Intu got it badly wrong but their CEOs didn’t feel the pain. In fact, the rewards for the main players were eyewatering gains when their cumulative earnings have topped £100 million.

This detachment of earnings to company performance of course is not unique to property companies, but their astonishingly poor performance in the face of massive structural change in the industry ,and now Covid, belies their bloated rewards.

It’s easy with hindsight to say that some of these executives were asleep at the wheel, but with that hindsight its easy to see how they missed some pretty obvious trends; the rise and rise of online shopping, and the steady demise of the high street, given a massive boost by Covid, and now a major hit to the office market given the same cause.

Some big bets were made buying up some of the country’s biggest shopping centres, whose values have since been decimated. John Whittaker’s Capital Shopping Centres took over the now in administration Intu, owner of Manchester’s Trafford Centre, while fending off what would, with hindsight, have been a lifesaving £3bn takeover bid from an American property group.

A spending spree by Intu buying up Westfield sites and Midsummer Place in Milton Keynes left the company loaded down with so much debt, when the final straw of Covid hit there was no way it could survive. This despite frantic efforts to pull off a rescue deal, through refinancing and an attempted rights issue.

Wrong horse

Hammerson backed the wrong horse too when it switched from offices to retail, selling lucrative office space at a knock down price to a Canadian investor that promptly made a £1bn profit on the deal. Hammerson then continued to invest in failing retail sites such as the Grand Central in Birmingham. Unsurprisingly perhaps Hammerson’s CEO earned £19m over 10 years while the shareholders have lost around £2.2bn at today’s market price.

Similarly, British Land sold valuable real estate in the city to a private equity group at what turned out to be a steal, and then British Land proceeded to plough the proceeds into retail shopping centres, including Drakes Cross in Plymounth. Not that the CEO suffered with the demise in these centre’s values, he earned £36m while shareholders lost £702m

Land Securities managed to sell off some of it’s smaller regional retail shopping centres, but bought into the Bluewater Kent for £700m at the very top of the market.

These CEOs’ abilities to read the runes and see the signs of massive structural change coming, even before Covid-19, that’s just been an accelerant, has enriched the private equity giants while destroying the value of the companies for their shareholders, but not at the expense of the CEOs.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – COMMERCIAL: Why the big four property giants read the runes wrong | LandlordZONE.

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BREAKING: Landlords, agents and charities unite to demand £230m from Ministers for struggling tenants

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Private sector tenants who are ‘falling through the gaps’ of the current benefits system and building up rent arrears must be given financial help to pay off this debt, six of the private rental sector’s leading landlord, agent, housing and poverty organisations have said today.

The National Association of Residential Landlords, Shelter, ARLA Propertymark, Crisis, Generation Rent and Citizens Advice have released a joint statement to Ministers proposing £270 million of help for renters who have lost out on income or been furloughed as a result of the pandemic.

This highly unusually alliance says the cash should only be used to support tenants who have run up arrears since Covid began in March, and that the money should include grants for those in most financial need and zero-interest loans for those who are able to repay them. It also says that, despite recent government efforts to increase housing benefit rates to cover the bottom third of private rents, for many tenants this is not enough.

Chris Norris (right), Policy Director for the National Residential Landlords Association, says: “Whilst the vast majority of landlords and tenants have been able to reach agreements where rent arrears have built, in some cases this has proved difficult.

“A financial package, such as that we propose today, would greatly assist tenants and landlords to achieve what we all want, namely to sustain tenancies.”

Timothy Douglas, Policy & Campaigns Manager ARLA Propertymark, says: “It is vital that the UK Government introduce emergency measures to support those in rent arrears brought about because of Covid-19 to ensure that tenancies are maintained, and we keep the rent flowing.”

Polly Neate, chief executive of Shelter, adds: “Ever since this pandemic gripped hold of the country, causing chaos for hundreds of thousands of renters, our services have been deluged with calls from worried families and workers plunged unexpectedly into debt.

“When the ban lifts, their ability to clear Covid-arrears will be critical if they are to stay safe in their homes.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Landlords, agents and charities unite to demand £230m from Ministers for struggling tenants | LandlordZONE.

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LATEST: Oxford reveals crackdown on landlords within plans for first selective licensing scheme

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Landlords in Oxford face tough new rules that could force them to have a licence for every privately rented property.

The city council is determined to shake up the sector – which makes up almost half the housing stock – by proposing to renew its existing HMO additional licensing scheme and introduce a new selective licensing scheme to cover all other rented homes – not just HMOs.

Oxford was the first council in England to introduce a citywide scheme that required every HMO to be licensed, back in 2011, and is not afraid to flex its regulatory muscles; last week it won a lengthy planning battle against a landlord letting out his property for short term lets after he appealed to the Planning Inspectorate.

It’s now urging other landlords to apply for proper permission before they let out their homes as short term lets.

Other council proposals include developing a new intelligence-led enforcement model using an algorithm to identify unlicensed properties and taking over powers to fine rogue landlords for not meeting legal minimum energy efficiency standards.

The National Residential Landlords Association believes its current scheme has led to rents increasing, and to those on lower incomes in the city being driven out of it, as the council seeks to rehouse people in Birmingham and elsewhere.

Gavin Dick, local authority policy officer, tells LandlordZONE: “This will be the third incarnation of additional licencing in Oxford. It comes after the council re-introduced the scheme in 2015 as it did not deliver its objectives in the first five years. The NRLA fails to see what the local authority hopes to achieve with the scheme that it has not already done over the past 10 years.”

If approved by the council, a 12-week public consultation on the new licensing schemes will be launched on 10^th September.

Read more about Oxford’s private rental market regulations.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Oxford reveals crackdown on landlords within plans for first selective licensing scheme | LandlordZONE.

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Tenant eviction ban is bad news for All

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In this video below, I share my view on why the Government’s extension of the tenant eviction ban is bad news for both landlords and tenants.

I also share with you the Australian model for tenancy law and why it’s better.

The post Tenant eviction ban is bad news for All appeared first on Property118.

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Government must U-turn again to help landlords

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The Government’s plans to extend the evictions ban could leave private landlords without any rent for up to two years.

In a letter to the Prime Minister, the National Residential Landlords Association (NRLA) has said that the Government is asking landlords to subsidise struggling renters and rewarding those who are wilfully refusing to pay their rent.

The post Government must U-turn again to help landlords appeared first on Property118.

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BREAKING: ‘Stop rewarding renters who are wilfully avoiding rent’, says NRLA letter to Prime Minister

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The NRLA has written to Boris Johnson today to claim that his government’s latest evictions extension means it is asking landlords to subsidise struggling renters and rewarding those who are wilfully avoiding paying rent.

The industry association has also calculated that on average landlords will now be waiting for two years to regain possession of their properties, and an average loss of £20,800.

This follows the ‘chaotic’ U-turn announcement last Friday that the stay on possession hearings is to be extended until September 20^th, with a six-month minimum notice period before eviction notices can be served and the de-prioritisation of rent arrears within the court system for all but the most serious cases.

The letter points out to the Prime Minister that most private landlords are individuals, renting out just one or two properties, and are not ‘property tycoons with deep pockets able to subsidise rents indefinitely’.

Ben Beadle, Chief Executive of the NRLA (pictured, above) says that the government’s refusal to help landlords in England and Wales will also have consequences for tenants as landlords turn to money orders to recoup their losses, leaving tenants credit scores ‘in tatters’.

To solve the crisis, Beadle suggests the government must offer the worst affected tenants hardship loans to pay off Covid rent arrears once the pandemic is over, a scheme that the Welsh government recently pioneered.

“The overwhelming majority of landlords have been working constructively with their tenants to sustain tenancies where rent arrears have built as a direct result of the pandemic,” says Beadle.

“The Government’s actions are a kick in the teeth for all these landlords who have done the right thing.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: ‘Stop rewarding renters who are wilfully avoiding rent’, says NRLA letter to Prime Minister | LandlordZONE.

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CELEB ACTIVISM: Maxine Peake speaks at street protests against eviction ban ending

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Actress Maxine Peake took a new supporting role when she joined tenants’ groups in Manchester protesting against evictions.

The film and TV star turned up at the socially distanced event organised by Tenants Union, Acorn and Greater Manchester Law centre which saw trade unionists, housing activists and homelessness groups demonstrate outside the Manchester and Salford Civil Justice Centre.

She told protestors that she was there to lend support. Said Peake: “It’s appalling what’s going on. I’ve realised how bloody lucky I am. We can try to continue to fight for people’s right to live without stress and fear of eviction, or where their next meal is coming from.” She encouraged them: “Get involved as much as you can and keep up the amazing work.”

Salford thespian

A long-time supporter of the law centre, the Salford thespian is known for her sometimes radical views and was recently embroiled in the scandal over Rebecca Long-Bailey’s sacking by leader Keir Starmer, after an interview Peake gave that contained an anti-Semitic conspiracy theory, which the MP re-tweeted. She later said the statement was inaccurate.

Despite the Government’s last-minute extension of the ban on evictions, protests have been held throughout Manchester, including outside courts where cases will be heard.

The Acorn union is calling for a serious reform to renting, to prevent a wave of homelessness and has repeated its intention to resist evictions and defend communities when the COVID eviction freeze comes to an end on 20^th September.

It reckons 20,000 renters across Greater Manchester are at risk of losing their homes.

Union leaders have also written to the Government stating that they fear that homelessness could return to the streets of Greater Manchester on a scale not seen since the 1930s if rapid and decisive action isn’t taken to avert the crisis.

Watch Peake’s speech.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – CELEB ACTIVISM: Maxine Peake speaks at street protests against eviction ban ending | LandlordZONE.

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EXCLUSIVE: FCA to ensure buy-to-let firms look after landlords who have taken ‘mortgage holidays’

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The FCA has revealed that buy-to-let mortgage providers may soon be covered by the same Covid regulatory guidance that consumer mortgage providers are required to follow by the financial regulator.

This means that landlords who have taken a mortgage holiday during Covid would be covered by the same ‘duty of care’ rules that home owners in the same position are currently afforded.

LandlordZONE contacted the FCA after it published new draft guidance for mortgage lenders, which aims to ensure that home owners get the support they need in these extraordinary times, to ask if landlords would get the same protection as other mortgage borrowers.

“The framework we are proposing for the tailored support that we want firms to provide after the expiry of the June Guidance is that set out in our Mortgage: Conduct of Business rules (especially MCOB 13),” the FCA says.

Mortgage holiday

It says this guidance is designed to ensure that mortgage firms provide support to borrowers who have taken a mortgage holiday during the Coronavirus pandemic but who continue to face financial difficulties, as well as those who may be considering a mortgage holiday in the future.

This guidance was published on 20^th March and updated twice during June, enabling borrowers to take-up a first and subsequent ‘payment deferral’. This expires on 31^st October and the FCA is now consulting on its future approach as ‘the wider situation develops’.

But the guidance has not included most buy-to-let mortgages, which are unregulated, unlike those for home purchases,

“However, we do have regard to the unregulated activities of the firms we regulate – and the draft guidance (at para 2.6) explains that we might look at the guidance when assessing if a firm was meeting our Threshold Conditions,” the FCA has told LandlordZONE.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: FCA to ensure buy-to-let firms look after landlords who have taken ‘mortgage holidays’ | LandlordZONE.

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Westminster online tool encouraging HMO tenants to claim Rent Repayment Orders!

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In a move designed to punish as many landlords as possible with crucifying Rent Repayment Orders of up to 12 months rent, the City of Westminster has launched a “Find out if you can screw your Landlord” tool on their website.

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