When a tenant behaves badly, fails to pay the rent, and/or absconds
during the night, a landlord often has limited means at their
disposal for making the tenant see the error of their ways other than
trying to pursue them through the courts. But when two landlords from
London were faced with similar problems, they decided to take action
and contact the tenant’s employer, which caused a great deal of
embarrassment to the tenant!

Email shame

The tenant, a senior lawyer at a London law firm, was mortified when
his landlords fired off an angry email to his co-workers claiming
that he owed them rent for the previous two months and alleging he
had simply vanished from the property without clearing his belongings
or returning the key. They asked his co-workers to confirm the man
still worked at the firm and to contact him on their behalf.

I’ll see you in court

The angry tenant issued court proceedings against his landlords,
claiming he had been “injured in his reputation” and that he had
suffered great embarrassment and emotional upset.

In return the landlords fought back with a strongly worded reply
making counter claims about the tenant’s atrocious behaviour and
referring to an anonymous text message alleging the man had spent all
his cash on unsuitable female companions (a claim that was strongly
denied by the tenant). The landlords said their email was entirely
justified because they felt the tenant was acting in an unscrupulous
manner and bringing his law firm into disrepute.

The tenant later dropped his court action citing “disproportionate
costs” as a reason, although he admitted he had been a “problem
tenant”.

According to figures from the General Lifestyle Survey carried out by the National Statistics Office, the number of households renting properties from private landlords has increased by 5% between 2008 and 2011. In the same time period, the number of people with a mortgage fell by 5%.

Reasons why more people are renting

Analysis of this trend would suggest that a fall in the number of people with a mortgage ties in with the beginning of the housing market crash—once house prices dropped into the doldrums, lenders made it extremely difficult for borrowers to get a mortgage, and so far nothing much has changed. Interestingly, figures revealed indicate that the proportion of people renting homes was even higher in the 1970s.

Good news for landlords

The rise in the number of people living in private rented accommodation will come as no surprise to many landlords. After all, in some areas of the UK, demand far outstrips supply, which is why unscrupulous landlords are able to rent out sheds in gardens under the guise of a “compact bedsit with a scenic view”.

Other interesting statistics from the General Lifestyle Survey

 The number of unmarried women has risen by 25% since 1979, which is good news if you are a man on the lookout for a wife

 The number of cigarette smokers has fallen by 25%, which is bad news for the tobacco companies and excellent news for the beleaguered NHS

 Three-quarters of all households now have access to a vehicle

 The number of people drinking on five or more days per week has fallen by 7% in men and 4% in women—hardly surprising when you consider how much a drink costs these days!

Estate agents have been subject to the controls of statutory regulation since 1979, but despite the fact that letting agents often deal with large sums of cash on behalf of tenants and landlords, they have thus far avoided the same regulation.

A change to the law

Many in the industry have been campaigning for a long time for the government to introduce legislation to help cut down the incidence of poor practice in the industry, so yesterday’s decision in the House of Lords to make an amendment to the Enterprise Bill, which allows for statutory regulation of letting agents to be introduced, has been widely welcomed.

“Renting is now the only housing option for millions and our research has shown this market is dogged by poor practice and there is an alarming lack of consumer protection. Tenants deserve much better and the Government must take this opportunity to improve regulation and redress in this sector. We want letting agents to be covered by the same rules as estate agents, overseen by an independent ombudsman,” commented Richard Lloyd of Which?

How will the changes affect landlords?

Rogue letting agents have long been the scourge of landlords (and tenants) and although there are a great many reputable letting agents who provide an excellent service, there are still all too many who act improperly. With the recent change to the law, landlords will now be protected and the Office of Fair Trading will have the power to ban agents who rip off their customers, which is good news for everyone.

Most savvy landlords are aware that some areas of the UK are more
attractive than others when it comes to investing in rental
properties. But a recent survey conducted by Home.co.uk has shown
that there are some surprising anomalies in the profitability (or
not) in some parts of the UK.

North – South divide

It doesn’t take a genius to figure out that properties in London are
going to offer far higher returns than a deprived part of Teeside,
and sure enough, some of the best performing rental areas are in
London. However, rather surprisingly, the areas that are the worst
performing in terms of return on investment are spread right across
the UK.

Don’t buy beside the seaside

Three of the worst performing areas are popular seaside resorts in
Kent: Margate, Ramsgate, and Broadstairs. I don’t know why this is
the case, but the figures indicate that you would lose money even
owing a property in any one of these towns, irrespective of whether
you were unable to find a tenant (and that wouldn’t be easy either
since the average void period here is 134 days).

Do your research

It is always sensible to do your research before investing in a new
area. Ask agents how easy it is to find tenants and check out what
the average property prices and rental incomes are. Think about what
type of tenant you are targeting and find something to suit. After
all, there is little point in targeting young professionals in a run
down town where the unemployment rate is more than 50%.

Although the majority of tenants are pleasant, reliable and pay their rents on time, a small minority are not, and it is these tenants from Hell landlords need to learn how to avoid where possible.

Tenants from Hell

No landlord wants to let a property to someone who never pays the rent, but unfortunately, non-payment of the rent is the least of your problems if you end up with the tenant from Hell. This person will probably cause huge damage as well as paying no rent. And in the worst cases, they might even sub-let your property to a load of illegal immigrants, steal your identity and take out loans on the property in your name, or set up a drugs factory inside.

How to avoid the tenant from Hell

 Check every piece of information given to you, including employer references, references from previous landlords, and credit history.

 Research their employer online and make sure they even exist, and then ring the employer and ask questions to verify information you have been given.

 Check out a potential tenant on social networking sites. You can see what kind of person they are from the kind of content they post online. And if they are employed, check them out on Linked-in.

How do bad tenants fool landlords?

Tenants with a dubious history will sometimes enlist a friend or relative to act as a former landlord or employer. To weed out this kind of deception, you may need to cross check facts and information. If anything seems remotely awry, listen to your gut instincts and investigate further.

Buy to let landlords are an invaluable source of housing for tenants claiming benefits, particularly in some areas where local authority housing is in extremely short supply. Unfortunately, one of the largest lenders on the high street, Nationwide, has now withdrawn all buy to let mortgage products for landlords specialising in the Local Housing Allowance market, or in other words, landlords who let to tenants claiming benefits.

How will this affect LHA landlords?

New landlords looking for a buy to let mortgage with a view to letting their properties to benefits claimants will no longer be able to apply for a mortgage with the Nationwide. There still lenders offering buy to let mortgages for the LHA market, but the choice pf products is now a lot smaller. The only landlords who are immune are those who own their properties outright.

How will this affect the rental market?

Rental homes are already in very short supply in some areas and in many cases, the private rental landlords provide a valuable boost to the overstretched Local Authority housing stocks. With a reduction in the number of available mortgage products for aspiring landlords, there is no real incentive for them to market their properties at tenants claiming benefits, which is likely to leave some vulnerable tenants homeless.

What happens if my tenant loses his job?

If your property is mortgaged and your working tenant subsequently ends up on benefits, you must check the terms of your mortgage or you could end up in breach of the conditions of your lender.

According to figures released as part of the English Housing Survey, as many as one in ten buy to let homes in the private sector could be impossible to let in five years because they don’t meet minimum energy efficiency ratings.

Poor results for the private rental sector

Nearly 12% of homes in the private rental sector are currently rated F and G in the energy efficiency scale. Unfortunately, because of new laws passed by the government, landlords will not able to let out these properties after April 2018. The government has yet to decide whether the ban will come into effect on a set date or if tenancies in affected properties can continue until the end of the tenancy.

Causes of low energy efficiency

In most cases, the poor energy efficiency rating is as a result of no cavity wall insulation where wall cavities exist, or insufficient loft insulation. The figures are also a reflection of the fact that many buy to let homes in the private sector are older properties with no double-glazing.

Green Deal

The government has introduced the Green Deal scheme to try and encourage landlords and owner-occupiers to improve the energy efficiency of their homes. Landlords can borrow money to make essential energy efficiency improvements and the loan is repaid by supplements added to the property’s electricity bill. Since energy improvements should reduce the electricity bill, the cost of the work is effectively cancelled out.

Tenants can ask for improvements

As of 2016, landlords will have to make reasonable improvements to the energy efficiency of a property if their tenants ask for work to be carried out.

In some boroughs of London, housing is in desperately short supply. There are quite simply not enough affordable homes available for tenants, which is why rents are skyrocketing and unscrupulous landlords are letting out ramshackle garden sheds to make extra money. So in an attempt to try and deal with the housing shortage in their borough, Ealing Council has come up with an innovative solution.

Home improvement grants

Landlords in Ealing are being offered the chance to claim up to £30k if they turn an empty home into a rental property. The ‘empty homes’ grant is designed to cover the cost of home improvements and repairs for properties that have been empty for more than six months. A further grant of up to £25k is also on offer for homeowners who allow their properties to be managed by a social landlord for a minimum of five years.

Is there a catch?

Under the terms of the ‘empty homes’ grant scheme offered by the council, the property must be ready for tenants to move into within twelve months of the money being approved. There is also a limit of £30k, so if repair works costs more than that, the landlord will have to fund it out of his own pocket. Landlords must also commit to keeping the rent on the property at an affordable level for at least five years.

Free matchmaking scheme

Ealing Council are also offering to help owners of empty, derelict homes get in touch with property developers looking for a house to renovate with a view to letting out at a later date.

With a lot of pension plans not worth much these days, it is hardly surprising that many landlords view their buy to let property portfolios as a way of funding their retirement. In a recent survey, the results showed that around 84% of landlords questioned entered the property rental market with a view to boosting their income upon retirement. And who can blame them?

Rental income from property

A further 60% said they intended on living off the income from their investment portfolio instead of relying on a pension. Some even went as far as saying they had made no provision for their retirement and therefore their properties were their pension, in which case they would probably sell up once they retired completely.

Is the rental market still strong?

Demand for rental properties remains as high as ever. The number of tenants falling into arrears is falling, as are void periods, which is always good news for landlords. Although there was a slight dip in rental yields towards the end of last year, on average property investors can expect to see a 6.2% in rental yield under the current conditions, which is considerably higher than any savings account you might find on the high street.

Is property investment a good retirement plan?

As long as you manage your investment carefully, investing in rental property makes good sense for those who have spare money available and wish to boost their pension plan. However, returns on investment do vary greatly across different regions of the UK.

A recent report published by the Office of Fair Trading (OFT) has revealed that many of the complaints received by the OFT relate to charges and service fees. Landlords and tenants have made more than 4,000 complaints in respect of letting agents and a large percentage were unhappy that extra charges and fees had been added on after a contract had been signed. There were also numerous complaints about poor service and mismanaged deposits.

A call for regulation in the letting industry

In light of its findings, the OFT is calling on the government to introduce greater regulation in the lettings industry—this would hopefully ensure more consistency for customers who decide to use the services of a letting agent when letting out a property or looking for a home to rent.

Consumer groups comment

Top UK consumer groups, including Which?, have welcomed the call to action for the OFT.

“The government must act quickly to require all agents to sign up to a complaints scheme so that tenants know where to turn to for redress when things go wrong. This should be done by amending the Enterprise Bill currently before Parliament,” Which? executive director Richard Lloyd was reported as saying on the BBC news website.

In a further recommendation, Arla advised landlords to always use letting agents who are members of trade bodies.

“We have long-called for a central system of regulation, and would agree with a number of the OFT’s recommendations to help improve the market. In particular, agents should always be transparent about the fees they charge, and the services associated with those fees,” said managing director of Arla, Ian Potter.