Are you ready for the new EPCs?

From April 6th, landlords and letting agents will be required to produce a new Energy Performance Certificate (EPC) for all rental properties in England and Wales. This is designed to ensure that residential and commercial lets adhere to the same rules applicable to properties for sale.

How will the new EPCs affect landlords?

Landlords and letting agents must ensure an EPC has been commissioned before they begin to market the property; Trading Standards officials will be given powers to check up whether this has been done. Once an EPC has been commissioned, it must be made available within twenty-eight days (and preferably within seven days) of the property being marketed. The front page of the EPC should be included with any documents produced to market the property, whether you are advertising via an online website, or via any other outlet.

Previously, landlords did not have to produce an EPC until just before contracts were signed, but under the new rules, prospective tenants now have the right to see the EPC before they make an appointment to view the property—which means they are better able to make a judgement as to the energy efficiency of the property before they commit to a rental term. The design of the EPC has also been improved to make it easier to understand—details about energy costs and how to improve them are clearer.

What happens if you fail to adhere to the new regulations?

A failure to comply means you face fines of up to £200 for residential properties and £5,000 for commercial properties, so it makes sense to fall into line with the new regulations!

Rents Are Still Rising

For the first time ever, average rents in England and Wales have bucked the trend and risen during January. In previous years, figures compiled at the end of January have normally shown a drop in the post Christmas period, but this year, thanks to an ever-increasing demand for rental accommodation, rents rose across all regions except two: Wales and the North East of England.

If you are a landlord like me, you may already be aware of the increasing demand for your properties—perhaps you have a waiting list for properties in especially desirable areas?

Well it is certainly true to say that in some areas, demand for rental properties is far outstripping supply, which in turn is fuelling the increase in average rent prices. In London, for example, rents have been rising for almost thirteen months solid and figures for January show that the average rent in London increased by 0.8%. However, although London saw the biggest rent increases during 2011, it was not top of the list for January 2012. Interestingly, the West Midlands and the South West saw the biggest increases in average rents in January—1.8% and 1.5%.

What lies beneath the sudden surge in prices straight after Christmas (traditionally a time when most tenants tend to stay put rather than move)?

According to experts in the rental market, there are several reasons why demand for buy to let property is continuing to rise, thus pushing rents up. Firstly mortgage lending is still very low and more people are choosing to rent rather than buy, and secondly, the economy remains weak and a lack of jobs is sustaining the demand for rental homes.

Longer Tenancies Means More Deposit Disputes

The average tenant is now much more likely to stay in their rental property for longer. On the one hand this is a good thing as landlords do not need to worry so much about having an empty property, but on the other, longer tenancies mean tenants and landlords are more likely to end up in a dispute over the deposit.

Why do longer tenancies lead to more deposit disputes?

The longer someone stays in your property, the more likely it is that the property will be subject to wear and tear, and when this occurs, a landlord could decide to hold on to the deposit in order to cover the cost of repairs and cleaning bills at the end of a long-term tenancy. Should this happen, the tenants are then within their rights to turn to arbitration to try and recover their money.

How can deposit disputes be avoided?

As I have said many times previously, the best way to avoid costly deposit disputes is to ensure you have a comprehensive inventory in place at the start of any new tenancy agreement. Normal wear and tear is a fact of life with rental properties, just as it would be at home, but if you wish to avoid the hassle of arguments over who is responsible for damage, prepare a thorough inventory of the condition of your property that details the condition of everything in it. And since a detailed inventory is designed to protect both you AND your tenant, it is not unreasonable to suggest splitting the cost of having one professionally prepared.

Is your Investment Property your Pension Plan?

When you have spent forty plus years working hard to secure a decent retirement fund for you and your spouse, it can come as a real shock to find that your pension is incapable of giving you a comfortable income, and in some cases, barely any income at all. So, given the current economic situation, it is not surprising that more and more people are choosing to invest their extra cash in the rental property market, hoping that when they finally hang up their work boots forever, their smart investment will help them enjoy the little extras in life.

So will your investment portfolio pay for a few round-the-world-cruises, or should you increase your pension contributions instead?

Investing money in rental property might seem like a good idea, but it is important to remember that becoming a landlord is not as simple as you might think. Whereas the money you pay into a pension plan requires very little of your attention on a day-to-day basis, administering rental properties can be a full time job if you have more than one or two.

If you think of property investment as a small business, you would not be too far wrong. There are many rules and regulations to adhere to, not to mention responsibilities to your tenants, so it is a good idea to do your homework before ploughing all your retirement funds into property investment. However, becoming a landlord is an excellent way of bolstering up an existing pension fund and providing you with greater financial freedom as and when you retire.

Beware of Mould and Condensation in Rental Properties

Condensation is problem we all face over winter. It is cold outside, windows stay closed, and the warm moist air generated from kitchens and bathrooms lingers, eventually condensing on cold windows when the house cools down. Unfortunately, if the condensation is not dealt with, it turns into mould, and before long windows are blighted with green and black fungal growth. Mould can also appear on walls, furniture, and in serious cases of damp, on soft furnishings and carpets in the form of mildew.

How does condensation and mould affect landlords?

Aside from any problems you might have in your own home, mould and mildew are often a big issue in rental properties. Condensation tends to be more common in older properties due to poor ventilation and heating, but it can just as easily be caused by common practices such as drying clothes on radiators and failing to properly vent tumble dryers outside.

Condensation and mould infestations are very difficult to get rid of if they are allowed to spread. Condensation rots timber framed windows from the inside out and can stain UPVc windows. Mould is also a serious health problem if left untreated: fungal spores can cause allergies and asthma, and in severe cases, toxins can form that are life threatening.

As a landlord, it is your duty to take care of building maintenance issues that might be causing mould—for example a leaky roof—but if the problem is down to the tenants drying clothes indoors or not using any extractor fans provided, it is a good idea to warn them they could lose their deposit if condensation and mould growth lead to permanent damage inside the property.

Rogue Landlords vs. Responsible Landlords

There was much ado in the press yesterday about Shelter’s “5 point plan for tackling rogue landlords” and I read with interest that more than 86,000 tenants had apparently made complaints about their landlords—none of them mine, I hasten to add!

Are a large percentage of landlords really flouting the law and treating their tenants with contempt?

Looking at Shelter’s statistics, it would be easy to assume so, but as any good politician knows, it is very easy to make statistics work for you. 86,000 complaints might sound like an alarming figure and you would be forgiven for thinking that an awful lot of tenants are living in squalid conditions straight out of a Charles Dickens novel, but in actual fact the figure quoted only represents 2% of tenancies in the private rental sector.

Obviously there ARE rogue landlords out there, taking advantage of the current boom in buy to let and failing to meet their obligations to tenants under the law, but the vast majority are law abiding and compliant.

I strongly believe that the buy to let sector needs regulating, but rather than throw out some emotive statistics, it would be better to encourage greater self-regulation amongst landlords and give the courts powers to enforce heftier penalties on those landlords who fail to make improvements in their properties. Many local authorities are more focussed on introducing licensing schemes for private sector landlords, but whilst this is not a bad thing, they need to start working more with the private sector and recognise that responsible landlords provide an ever-increasing percentage of housing for those in need.

Chancellor sets up FPC Committee to regulate mortgages

In an attempt to prevent another burst housing “bubble”, the chancellor, George Osborne, has announced he will allow the Bank of England to vary the types of mortgages people can have. At the moment, the big lenders are still very wary, and many people are in the unfortunate position of being unable to save up a large enough deposit in order to buy a property, which is affecting everyone—not just those struggling to get on the first rung of the housing ladder.

As most of us probably remember, the situation was all too different a few scant years ago. Banks and building societies were literally throwing money at people and it was not unheard of to be offered mortgages of more than 100% of the property value. But since the property bubble burst and many major banks went to the wall, the housing market has contracted and most lenders now require larger deposits before they will give you a mortgage.

A Financial Policy Committee, whose powers will come into effect at the beginning of next year, will administer the Chancellor’s plan. The committee’s job will be to moderate the economy. Lenders will have the power to make their mortgage products more attractive by lowering the amount of deposits to as little as 5% if/when the market begins to slow down, which will attract first time buyers and property investors, but if the market threatens to heat up too much, lenders can increase the amount of deposit required in order to cool it down.

The Future Looks Bright for Buy to Let

The weather might be rubbish and the property market bleak, but the buy to let market is booming and landlords are now faced with an even greater array of mortgage products compared to the same time last year. In fact, according to one financial information website, there are approximately one hundred more buy to let mortgage products available to would-be landlords, and thanks to the increasing level of competition in the buy to let marketplace, lenders are being forced to cut their interest rates in order to attract new customers.

This situation is a far cry from when the credit crunch peaked: back then, lenders withdrew many of their buy to let products because the rental market was viewed as “high risk”, which meant that aspiring landlords had very little choice when they wanted to invest or re-mortgage. Thankfully things have improved a great deal since then and lenders are beginning to recognise the potential of the current UK buy to let market, but experts are warning that this may well change over the coming months and lenders are likely to tighten up their lending criteria.

However, for the time being, property investors and landlords are faced with an almost overwhelming choice of mortgage products, both in the high street and from specialist buy to let lenders, and many of the large financial institutions are promising to further increase their percentage of mortgage lending in the buy to let sector. So with ever increasing numbers of people renting as opposed to buying, the future looks bright for buy to let.

Olympic Lets – Good or Bad Idea?

The 2012 Olympic Games is only a few short months away and already many investor landlords in London are rubbing their hands together with glee at the thought of all the extra cash they can charge for the few short weeks over the Games period.

Experts are predicting that with an anticipated 7.8 million people expected to visit London for the games there will be a serious accommodation crunch in the capital between June and September. Therefore it is not surprising that thousands of landlords are planning to evict their tenants as they will be able to charge visitors up to fifteen times more than the average weekly rent.

Some landlords and letting agents have already written penalty clauses into new contracts threatening tenants with astronomical rents unless they agree to move out for the allotted period, whereas others are simply planning to evict tenants to make way for temporary tenants willing to pay thousands for a few weeks accommodation.

Are short-term Olympic lets a good idea for landlords?

On the face of it, yes, the prospect of earning as much as £15,000 for a three week let is too good to pass up, but if you take a step back and look at the bigger picture, you might not be quite so convinced. Good tenants are hard to find, so why risk losing a trouble-free tenant who pays on time every month? A temporary tenant is less likely to look after your property and once they have gone, the rental market in London will be swamped with vacant properties and you may end up with a very long void period.

New HMO Rules for Landlords in Oxford

In an attempt to drive up the standards of student properties in the city, Oxford City Council has changed the rules for landlords of smaller HMOs (houses of multiple occupancy). The new licensing scheme for shared houses is the first to be introduced in the UK, and since at least four thousand smaller properties in Oxford are currently let to groups of students, a lot of landlords will be affected by the change.

Each landlord of a small HMO must register his or her property with the council or risk being fined up to £20,000. Upon registration, a council team will then inspect the property to make sure it meets fire, health and safety regulations, and if it does, a HMO license will be issued. Tenants of smaller HMOs will also be given the opportunity to report their landlord if they deem their living conditions to be less than acceptable, and if a landlord is subsequently found to be in breach of the tough new guidelines, they could end up being taken to court and awarded a hefty fine.

Whilst some landlords might not be too pleased at the new scheme, it is definitely a step in the right direction for tenants living in Oxford. Houses of multiple occupancy have long been associated with sub-standard living conditions, which only serves to tarnish the reputation of decent landlords. Hopefully now the days of damp, squalid, and dangerously unsafe properties operated by cowboy landlords will soon be a dim and distant memory because, as one local councillor said, “there is nowhere left to hide…”