With Christmas just around the corner, the forecasters are predicting snow and ice over the next week or so, so it looks like we may potentially have a white Christmas. Interestingly though, it also looks as if temperatures are not the only thing to hit freezing point as 2012 becomes 2013: a survey of landlords on the popular housing website, Rightmove, has revealed that nearly two thirds of landlords are planning to ‘freeze’ their rents for next year.

Rent and affordability

It doesn’t take a rocket scientist to work out that if rents continue to rise steeply, more and more tenants will be forced into homeless shelters and cardboard boxes. Quite simply, if rents are too high, tenants can’t afford to pay.

It’s a vicious circle

Many people living in rented accommodation are not there through choice. They may have had a mortgage and been forced to sell to pay off debts, or they might be unable to get a foothold on the property ladder because of lender restrictions and an inability to save enough for a hefty deposit. All of these reasons have led to a massive demand for rental accommodation, which in turn has fuelled the meteoric rise in rents across the UK.

However, despite the demand, it seems that many landlords are starting to realise that increasing rents to make a bigger profit is not necessarily the right move. Price the rent too high and you risk dealing with the issue of rent arrears, which is a problem faced by many landlords as the rising cost of living squeezes everyone’s income.

I read an interesting article in The Guardian the other day. Written by a fellow landlord, the article discussed the innovative notion of whether landlords should stop asking their tenants for a deposit at the start of a tenancy and instead ask them to name a guarantor, a person who becomes legally responsible for any future liabilities that may arise as a result of rent arrears or property damage.

In the writer’s opinion, this was a far more sensible approach for many reasons. Since a large number of tenants do not have one month’s rent (or more) lying around in their bank accounts, asking for a large deposit up front can put families under enormous financial hardship. There are also a number of stringent guidelines to follow when dealing with a tenant’s deposit, and if you screw up, you face a minefield of problems.

Asking a tenant to provide a guarantor is certainly one way of ensuring that someone pays when things go wrong, and if the guarantor is a member of the tenant’s family, they are less likely to default on the rent or trash the property. However, guarantees still have to be enforced when the need arises, which can be a lengthy process, so some kind of insurance cover would be a better idea.

There is no right or wrong way of tackling the issue. Ultimately it is whatever works for you, but the best way (for me) is to find a reliable tenant who pays their rent on time and keeps the property clean, tidy, and damage free.

You might assume that if you have gone to the time and trouble to take a tenant to court after they failed to pay their rent, the debt would subsequently appear on their credit history and prevent them from doing it all over again to another landlord. However, this is apparently not the case thanks to a recently discovered ‘loophole’ in the system.

Once a country court judge has ruled in a landlord’s favour and granted him a possession order, the tenant is then ordered to settle his or her rent arrears. Unfortunately, thanks to a glitch in the system, if a landlord doesn’t enforce the order, the rent debt won’t be added to the tenant’s credit file in the form of a country court judgement (CCJ).

Credit checks help make sure landlords don’t inadvertently offer a tenancy to someone who has a history of failing to pay the rent. Lenders and rent guarantee insurance companies also use credit histories to help them decide whether a tenant is a good or bad proposition, so if the information on the tenant’s file is incorrect, these companies can easily end up offering finance to unsuitable people or paying out on unpaid rent claims multiple times.

So if you have been awarded a possession order against your tenant, instead of thanking your lucky stars that you can now say good riddance to bad rubbish and forget about your tenant from Hell, make sure you enforce the court order. This will register the debt on the tenant’s credit file and help to ensure the tenant isn’t able to repeat their bad behaviour yet again.

Shaun Doran writing in the Guardian a couple of weeks ago thinks so. His argument is that continuing financial pressures faced by low income families mean that many are struggling to stay on top of their living expenses, which in real terms means that the rent goes unpaid and eventually the landlord is forced to issue an eviction notice.

Tenants in receipt of benefits are often living hand to mouth. There are always stories of some families who manage to beat the system and live a very comfortable lifestyle in a Mayfair mansion, but the vast majority can barely afford to eat let alone buy furniture and white goods for their new home. Consequently, the lure of payday loans and companies such as Bright House, where instead of paying upfront for a new washing machine or sofa they can pay for the goods on a weekly rent to own basis, is a very attractive option for many families. It sounds like a good deal, but interest rates on these agreements are very high and over the course of a few months, the customer ends up paying significantly more.

What difference will furnishing a social housing property make?

Offering furnished properties can help vulnerable tenants create a decent home for their families. It also enables social landlords to reduce the likelihood of rent arrears and enjoy a regular income afforded by a long-term tenant, instead of having to deal with a tenant up to their eyeballs in debt. You don’t even have to spend a fortune on expensive furniture—there are plenty of opportunities to find good quality second hand furnishings for rented homes.

The Royal Institution of Chartered Surveyors has issued a call to the government to take steps to regulate letting agents because it says not enough is being done to protect landlords (and tenants) from the actions of a corrupt minority.

Why are letting agents not regulated?

It is all too easy for anyone to set up as a letting agent and start taking people’s money. Anyone can open a letting agency on the high street—they don’t need any kind of qualifications and they don’t need to register with an industry body. Unfortunately, this means that some disreputable types are seeing the lettings industry as their own personal cash cow, which has left some landlords out of pocket to the tune of thousands of pounds when the agent has unexpectedly gone out of business.

The report published by the RICS revealed that many letting agents were not fulfilling their obligations: deposits were not correctly registered with the DPS, inventories were not being drawn up, and in the worst of cases, excessive fees were charged and agreements broken. Because of these issues, the RICS says the industry needs to be regulated by the government, which would then help to protect consumers from those who seek to rip them off.

How can landlords avoid being ripped off by a corrupt letting agent?I

If you choose to use a letting agency to manage your property, always make sure you employ one that is a member of a recognised professional body. It won’t guarantee protection, but it should help to minimise the risks involved.

Trying to pull the wool over the taxman’s eyes is never a good idea. You might think you can get away with not declaring income from property investments, but eventually the long arm of HMRC is going to catch up with you. Thankfully, for all those landlords who have failed to declare taxable income, HM Revenue & Customs is giving them one final chance to put right their tax affairs in the form of a tax amnesty.

Profits gained from letting out or disposing of rental property are taxable, which means it should be declared by way of Self Assessment at the end of the financial year. Of course not everyone thinks that they should pay tax on what they earn, so instead they don’t bother submitting a Self Assessment return. However, just in case this applies to you, be warned that HMRC has specialist task forces in operation whose sole job is to uncover dodgy property dealings. Those landlords who are subsequently found to have failed to declare taxable earnings will face financial penalties, and in the worst cases, may even be sent to prison for a spell.

The tax amnesty is designed to encourage offenders to come forward and admit they are in the wrong. Genuine mistakes will be treated leniently and may even escape punishment, particularly if a landlord has been given the wrong advice by an HMRC advisor. But if you have been avoiding paying your taxes, it is a good idea to come clean now before a tax inspector comes knocking on your door!

House fires are always dangerous, but recent research released from the Electrical Safety Council has highlighted just how many fires are caused by problems in and misuse of domestic electrical appliances. Misuse of electrical items is now the leading cause of all house fires in the UK. Unfortunately, many tenants and landlords are completely unaware of the problems that significantly increase the risk of a fire breaking out.

What NOT to do with electrical appliances

• Don’t block air vents behind fridges and freezers – clean vents regularly to avoid a build up of dust and debris

• Avoid overloading sockets – always make sure your properties have enough sockets per room and check that tenants are not plugging in multiple extension leads

• Remind tenants not to leave electrical appliances such as tumble driers running unattended for long periods of time

• Do not cover microwave vents

• Do not use cheap or second hand electrical appliances without BS safety ratings

How prevalent are electrical house fires?

Although the incidence of house fires has declined in the last three years, the number of electrical fires has increased by 33%, mostly as a result of the ever-increasing numbers of electrical appliances we keep in our homes.

How to reduce the risk of electrical fires

Ensure that there is a Residual Current Device (RCD) in the property’s fuse box (this cuts off power should a fault occur)—research has indicated that only around 50% of properties have this vital safety cut-off switch. You should also warn your tenants about the risks posed by misuse of electrical appliances.

Are you treating your buy to let investment portfolio as an extension of your pension plan for retirement? If so, then you are not alone and a recent survey of landlords in the UK found that many were viewing their properties as another source of income for their retirement. Indeed, many actually intend on living off the money generated from their buy to let properties.

Are buy to let properties a good retirement investment?

Given that around 80% of landlords questioned believe so, the answer is probably yes: a buy to let investment portfolio is definitely a good alternative to a poorly performing pension plan. Interest rates at the moment are diabolical. In fact you would be better stashing your cash under a mattress rather that waiting for it to collect a meagre few pence in interest from a savings account. So investing in property that can generate a steady income is probably an excellent plan if you have the money to spend.

But even if you are lucky enough to have a fairly decent pension plan, you can still use the income from buy to let to supplement your pension, which is what 20% of private landlords are currently doing. And if you find that you are short of cash at a later date, you can always sell one or more of your properties and release some equity.

Buy to let yields have never been so high, so now is an excellent time to consider investing in the rental market—although some areas of the country are out performing others and a bit of research is essential if you want to maximise your profits.

It doesn’t take an accountant to figure out that some long overdue changes are needed to the UK benefits system as too many people are taking advantage of the cash on offer and playing the system for all it’s worth.

Take for example Housing Benefit: when a family is able to claim more than £100k per year to live in a Mayfair mansion, there has to be something seriously amiss somewhere! This is just one of the issues the government is trying to address with the introduction of the ‘Universal Credit’.

How will the introduction of Universal Credit affect landlords?

Many landlords let their properties to tenants claiming benefits. The current Housing Benefit system allows for rent payments to be made directly to a landlord, which is useful if the tenant is not a reliable payer. Unfortunately, the government plans to scrap this policy unless a tenant has learning difficulties or is mentally ill, which could lead to a rise in rent arrears.

No landlord wants to deal with rent arrears—it takes time and money to sort out. Sadly, if tenants on Universal Credit end up with a poor payment record as a result of spending their benefits down the local pub instead of handing over the cash to their landlord, they are going to have a problem finding a landlord who is willing to offer them a new home.

The Minister for Welfare Reform (Lord Freud) tried to address some of the concerns held by landlords at the recent NLA National Conference in a question and answer session, but many landlords still remain sceptical about whether the new system will work as well as the government hopes.

Yes, you have read that correctly, but thankfully the property situation in the UK hasn’t quite reached such desperate levels, although there are plenty of unscrupulous landlords who are more than happy to let out a shed in their backyard, describing it as a “compact bedsit”.

China is one of the most populous places on earth and in the cities millions of people live shoulder to shoulder in high-rise buildings where space is at a premium. Even so, it is still hard to imagine how a 6-story building can be converted into an astonishing fifty-five capsule bedsits, but in order to maximise his income, one enterprising landlord in China has managed to do just that.

The building in Wuhan City in the Hubei Province now contains fifty-five tiny shoebox style homes. Each one is on average 4.5m2, but despite the cramped space, the capsules still manage to combine a sleeping area, bathroom and kitchen. Many are also shared, so it probably pays to get along well with your flatmate.

Considering the tiny amount of living space per capsule, you might expect rental homes like this to be less than popular, but according to the article in the Daily Mail, the average rent in the city is much too expensive for many young people on low wages, so ‘capsule homes’ are very much in demand. This might seem unbelievable, but looking at the pictures that accompany the article, I can see that despite the cramped living space the capsules are actually pretty cosy; some of the tenants have even made room for their pets!