In what many see as a far-reaching decision, the Scottish government has decided that landlords and letting agents will soon no longer be able to charge extra fees for a variety of routine things such as checking references, credit histories and drawing up inventories—all procedures that cost money.

Why has this decision been taken?

Housing charities in Scotland have been campaigning for a long time about the aggressive over-charging of fees by many letting agents and landlords. Obviously checking the credit history of a new tenant and engaging someone else to do a property inventory has a cost implication, but because the Scottish Rent Act [1984] is very vague about what constitutes a fee, in some cases excessive premiums were being charged to unsuspecting tenants. To try and address this problem, the Scottish government undertook a public consultation, the end result of which is a total ban on the charging of fees to tenants. It is believed that the definition of “fees” will be clarified and defined in law by November of this year.

How will this decision affect landlords?

In order to absorb the extra overheads, letting agents are likely to have to pass on the increase to their landlords. And landlords will need to do the same, which means rents will have to go up—probably by around 5%. This is bad news for everyone as there are already many tenants struggling to pay their rents at month end, so some will inevitably fall into arrears if their rents increase, which is of course not good for landlords.

Squatters aren’t fussy. Any empty property is fair game, whether it is a crumbling terrace house on a sink estate, or a £5 million mansion in Chelsea. So when you have a buy to let property remaining empty for any length of time, there is always a worry that squatters will decide your residence is perfect for their current living requirements. And once squatters move in, it can be a total nightmare trying to remove them.

However, as of September 1st, it will be a criminal offence to squat in a residential building of any description and therefore punishable under UK Law. Anyone entering a residential property unlawfully, with the intention of setting up home for any period of time, will be classed as a trespasser and subject to six months in prison or a £5,000 fine—or in the worst of cases, potentially both.

This is great news for landlords. If you have an empty property and you discover squatters have moved in, you can ask the police to act on your behalf and remove the unwelcome guests. You can also do the same if you have squatters currently in residence, and who still remain as of September 1st 2012.

The new offence of squatting will not, however, apply to tenants who are lawfully in residence, but who are withholding rent or refusing to vacate at the end of an agreed tenancy; in this instance, landlords will have to follow normal eviction procedures. The offence will also not be enforceable retrospectively, so even if you had squatters in residence prior to September 1st, you can’t take action if they’ve already left!

The Montague Report was commissioned by the government to investigate ways of tackling the current shortage of housing, particularly rented homes. One of the solutions the report has come up with is to introduce private funding from institutional investors to enable construction of large rental housing schemes to go ahead, something that is common in many other European countries.

At the moment, the majority of the buy to let rental sector is owned and run by scores of private landlords. But although the buy to let market is thriving, demand for rental housing is far outstripping the number of available properties in popular areas of the UK, which is why the Montague Report has highlighted the need for a more flexible approach to new build housing.

The National Landlords Association (NLA) has responded to the publication of the report with a statement saying:

“The NLA welcomes Sir Adrian Montague’s recommendation to increase investment in the private-rented sector and the Government’s recognition of the important role played by private landlords. At present, we are simply not building enough new homes to meet the demand. The genuine interest from institutional investors in building to rent is the fastest way to make a significant impact on the shortage of housing.”

The Housing Minister, Grant Shapps, has described the idea of private investment funding new rental housing as “interesting” when asked by the BBC for his comments, but Labour remains somewhat critical of the Montague Report’s suggestions, as it feels low income households might not be catered for in large for-profit build to let housing developments.

One bumbling council in the South West has managed to lose track of exactly how many HMOs it has in several towns within its jurisdiction. Unfortunately, without an accurate list of HMO properties, it can’t be certain that some landlords are paying the requisite licence fee.

Under the rules of HMO licencing, a landlord with a shared rental property housing six or more tenants over at least three floors must apply for a special HMO licence. These types of properties typically provide accommodation to students, young professionals, and single people, and are sub-divided into small bedsits with shared kitchen and bathroom facilities. An HMO licence helps local authorities keep track of such properties and allows them to check on the living standards to make sure they are safe for tenants.

At the moment, the council “thinks” there are at least eighty-three houses where three or more tenants share the accommodation, but it isn’t completely sure. Unsurprisingly councillors would like to gain a clearer picture of the current situation in order to ensure the correct licence fees are being paid and vulnerable tenants are not living in slums. So to this end, they are urging landlords to step forward and apply for an HMO licence if they haven’t already done so. And in the event that some landlords don’t manage to do this, local residents are encouraged to report any properties they suspect are housing multiple tenants.

The council does point out, however, that: “HMO licensing is there to protect the tenants and assist the landlords if or when help is required.”

In its attempt to regulate the private letting industry and protect tenants from poor and potentially unsafe living conditions, landlords in some areas of the UK are now required to register their HMOs, and any landlord who fails to register a property being used as an HMO faces a large fine and a possible letting ban.

However, there has been an unexpected side effect of giving Local Authorities “Article 4” powers. Instead of paying for an expensive HMO licence, landlords are apparently deciding that the more sensible way forward is to convert their larger properties back to single-family occupancy rather than keep them as shared lets, which means some existing tenants already living in HMOs are being given their notice to quit.

Local residents are also finding that property prices are falling in areas affected by the Article 4 changes as fewer landlords are choosing to invest in property in the area. So despite having spent years campaigning for better controls on larger buy to let properties, local residents in popular university towns and cities are now unable to sell their large family properties because landlords aren’t buying any more.

One MP from Leeds is hoping to try and persuade the government to step in and kick-start the local housing market by purchasing HMOs for use as social housing. Whether he gains enough support from other councillors and local residents remains to be seen.

So if you’re a landlord with HMOs in areas affected by the Article 4 changes, are you pulling out of the HMO market? Let us know in the comments!

As any responsible landlord knows, it is vital to have gas checked at least once per year to ensure they are safe and free from potentially hazardous faults that could endanger the life of the tenants living in the property. But, sadly, not all landlords consider such matters to be important and fail to carry out standard safety checks.

In a case described as “shocking” by the local HSE inspector, two landlords in Sheffield have recently been found guilty of endangering the life of their tenant and handed suspended jail sentences by Sheffield Magistrates Court.

Fortuitously, a housing officer from the council came to inspect the property and was concerned enough about the appliances to arrange for a Gas Safe inspector to come and check them out. Every single gas appliance in the property (two gas fires, a gas cooker, and a central heating boiler) was found to be rife with defects and decommissioned immediately. There was also evidence of carbon monoxide gas in the property, which as we all know, it a silent killer.

Failing to have gas appliances regularly checked and serviced is in breach of the law, but much important than that, these requirements are put in place to protect tenants’ lives. It might be tempting to put off calling out a Corgi registered gas engineer, especially if cash flow is a bit tight, but remember your legal obligations and don’t play Russian Roulette with your tenant’s life. If you do, you could end up with a large fine, a suspended prison sentence, or a death on your conscience.

More good news for landlords this week—according to figures published by a leading lender, rising rents are leading to increased buy to let yields across the whole of the UK. So although house prices are still in a never-ending freefall thanks to the grim state of the Eurozone and a double dip recession, the average gross rental yield for UK landlords has risen from 6% to 6.2% in the last twelve months.

Of course the main reason why landlords are enjoying an increase in their average rent yield is because rents keep rising in line with the surging demand for rental property across most of the UK. In June last year, the average monthly rent was £697 whereas figures for June 2012 show the average monthly rent is now £734, although tenants in London are paying on average £1,287 per month.

Are there variations in rental yields across the UK?

Rent yields are closely linked to property prices: the average monthly rent in London may well be very high, but because property prices are correspondingly high, too, rental yields are the lowest at only 4.8%. Landlords in the north of England, on the other hand, are considerable better off: here rent yields are at their highest (on average around 7%) thanks to much lower property prices.

If you are looking to invest in buy to let, Yorkshire and the Humber can offer good returns on your investment whereas London, the South East, South West and East Anglia offer a smaller return. However, rental yields are only one part of the bigger picture—landlords should always take into account the length of time a property is likely to remain vacant over a twelve month period as this will significantly impact on profit margins.

Experts in the private rental sector fear that the recent controversial decision by Newham Council in London to introduce a blanket initiative forcing all landlords operating in the private sector to sign up for a license, could have far wider ramifications for all UK landlords.

The Newham licensing scheme has been brought in to try and weed out rogue landlords operating in the borough. Newham landlords now have to apply for a license to operate, and if they fail to do so, they can be fined a maximum of £20,000.

On the face of it, it seems like good idea: once they apply for a license to operate, landlords will have to submit to an inspection of their properties to ensure they are up the specified standard. However, the level of bureaucracy required to administer many thousands of private rental properties is likely to become a major headache, and many potential landlords are probably going to be put off the venture altogether.

Unfortunately it may take a while before the negative fallout of the Newham scheme makes itself fully known and many landlords are concerned (quite rightly so) that other Local Authorities will take up the Newham licensing scheme before they realise what the potential problems are. So instead of helping to ease the problems caused by a small minority of so-called ‘bad landlords’, the number of available properties in the private sector will probably fall and some of the most vulnerable families in the country left homeless as a result.

There are many pluses to concentrating on the student sector for your buy to let property business, not least of which is the steady stream of rental income—students often pay up to a year in advance for their lets. But recent research has indicated that many students are struggling to pay their rents and the incidence of rent arrears amongst student tenants increased during the previous academic year.

On average, according to figures published by Mydeposits, students took around eighteen days to settle their rent arrears, which in the grand scheme of things is not too bad. In many cases, this was probably down to poor money management: What student wants to spend their money on boring stuff like the rent when they could be blowing it all on beer down the student union bar?

However, the government is planning to introduce further increases to tuition fees this autumn and many students who are already living on the poverty line will find it even more difficult to pay their rents, which is a concern for many landlords in the student sector. But despite this, most landlords questioned in the survey remain optimistic about the student lettings market and see no reason to change their buy to let business strategies.

How can landlords avoid student rent arrears?

The best way to avoid rent issues is to manage your tenancies correctly from the very beginning and ensure you are always contactable if one of your student tenants has any problems paying as this will help to avoid a small problem snowballing into an insurmountable one over time.

Social housing landlords in Scotland are going to find it a lot more difficult to evict a tenant who fails to pay their rent from now on. Recent changes made to the 2010 Housing Scotland Act are designed to counteract the effects of the current financial difficulties faced by millions of low-income families, by reducing the number of tenant evictions for rent payment arrears.

Shelter, a leading housing charity in Scotland, has welcomed the move as it is seeing increasing numbers of poorer families struggling to pay their rent, which in the worst cases leads to the family being evicted from their home. The changes to the Housing Act now mean that tenants living in social housing, whether Local Authority owned or in the private sector, will be afforded the same protection as homeowners.

How does this affect social housing landlords in Scotland?

Social housing landlords will now have to meet a number of pre-eviction requirements before being granted a court eviction order to remove any tenant who has not paid their rent. Landlords will have to show that they have tried to help the tenant: for example by offering a reduced repayment plan for any outstanding rent. Landlords will also be obliged to offer helpful advice on such topics as Housing Benefit.

Can problem tenants still be evicted for non-payment of rent?

Yes, any tenant who wilfully refuses to pay their rent can still be removed via a court eviction notice. However, ‘bad tenants’ are generally few and far between and in most cases the problem is caused by a lack of money rather than a strong desire not to pay up.