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Tenant confusion remains despite rental payments remaining steady

The coronavirus crunch is yet to translate into delayed rental payments but agents are warning that there is still tenant confusion about whether they are obliged to pay.

Analysis of 20,000 lettings by Goodlord, which helps landlords and agents automate tenancy contracts and record payments, found only 2% more properties than usual – an increase from 4% to 6% – are behind on rent since March 11th.

This is based on rent being more than seven days late.

Goodlord also reported that claims from landlords against its rent protection insurance policies remain below 1% of rented properties covered.

However, a survey by Goodlord with 124 lettings agents alongside this research found 84% have reported confusion amongst tenants, with many not realising they remain under obligation to pay rent.

Of those surveyed, 70% said that they have agreed payment plans with less than 10% of tenants so far.

Another 40% letting agents noted that the landlords they work with are being particularly supportive and are working with tenants to address rent payment plans, rent reductions, or supporting late payment plans where necessary.

There have been calls from tenant groups for the Government to introduce rent waivers.

Landlords can apply for buy-to-let mortgage payment deferrals if renters are in difficulty but these are not compulsory.

Tom Mundy, chief operating officer at Goodlord, said: “Despite only being a month since lockdown began, the late payment figures for the rental industry are so far fairly steady.

“They show that the overwhelming majority of tenants are still able to meet their obligations and we believe the Government’s furlough scheme will no doubt be playing a key role in this continuity.

“At the same time, agents and landlords are gearing up to offer more support in the months to come.

“Many agents, along with their landlords, are thinking about how they can offer flexibility, support, and guidance to tenants who might start to struggle.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Most landlords have been contacted by tenants about rent payments

Three quarters (74%) of landlords have been contacted by tenants saying they will struggle to pay their rent since the government’s COVID-19 measures were introduced on 23 March.

Renters’ unions are calling on the government to suspend rents for the duration of the coronavirus crisis.

However Paul Shamplina, founder of Landlord Action, says there is no ‘one size fits all’ approach, as landlords too have bills to pay and families to feed.

He said: “This is a nightmare scenario for everyone – landlords and tenants alike. It is really important that landlords do what they can to sustain the tenancy if possible, bearing in mind the court system is suspended and if a tenant vacates, there is a worry the property could be empty for a while.

“It is about working together in a practical way, understanding each other’s limits and supporting one another as best we can to get through this. I know of landlords who are in a privileged enough position to hold their tenants’ rent and have done so.

“However, the vast majority of private landlords own one or two properties, many with mortgages, and they too will be facing the same challenges of job losses.”

Over a third (36%) of landlords said they would struggle to pay their mortgage if their tenant did not pay rent this month.

Landlords can apply for up to a three-month payment holiday on their mortgage if their tenant’s income has been affected by this crisis, though some are worried about asking for fear of affecting their credit rating.

Landlords who have already fallen behind with mortgage payments due to rent arrears prior to the crisis may also struggle to access a mortgage holiday.

Shamplina added: “We’ve been inundated with phone calls from landlords concerned about rent payments and our advice is this: Speak to your tenants. Understand how they are financially impacted; explain how you will be financially impacted.

“Where possible try and come to an arrangement with them, understand what government support they are asking for. Having something to help cover the mortgage is better than nothing.”

Landlord Action has drawn up Rent Repayment Agreements for landlords providing a template which enables them to set out agreed terms of the repayment with their tenant.

BY RYAN BEMBRIDGE

Source: Property Wire

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Demand from tenants bounces back

Demand for rental property rebounded by 30% in the first two weeks of April, after falling by 57% in the last two weeks of March, Zoopla’s Rental Market Report has found.

Seeing as the sales market was hit by a 70% fall in buyer demand, Zoopla suggested people were looking to rent rather than buy owing to the current situation.

Annual rental growth stood at 2.4% as of March, down from 2.5% in April.

Gráinne Gilmore, head of research at Zoopla, said: “The flexibility of the rental market is one of the key factors which has allowed activity to bounce back more quickly than other parts of the property market. The rise in demand in the first two weeks in April indicates that some tenants are already mapping out their next move.

“As with the whole housing market however, activity levels and rental growth will likely be closely aligned to the economic landscape of the UK once the lockdown eases and the immediate impact of coronavirus starts to recede.

“Rental growth has increased steadily for the last three years as demand has increased in the face of dwindling new supply. But, if the responses to COVID-19 contribute to a rise in unemployment, as some official bodies have forecast, this will reduce the scope for any additional growth in rents. We expect growth to moderate this year, but to remain in positive territory.”

The total number of properties listed for rent have only fallen by 3% since 1 March 2020, indicating that there has been no major withdrawal of listings.

Mary-Anne Bowring, managing director of Ringley Group, said: “The rebound in demand for rental properties in the first half of April underlines the defensive, counter-cyclical qualities of rental housing as an asset class.

“A subdued for sale market will likely see demand for rental homes grow over the course of the year, as buyers put off committing to purchasing a new home and sellers hold off owing to a dip in values and impracticalities of trying to sell when social distancing measures are in place.

“The big question is who is going to meet this rising demand for rental housing. Many buy-to-let landlords were looking to exit the market thanks to additional tax and more stringent regulation.

“Coronavirus will only have added extra financial pressure, especially for those who own their rental properties outright so cannot benefit from a mortgage holiday but potentially face tenants withholding their rent due to their own financial circumstances changing.”

Neil Cobbold, chief sales officer at PayProp, said: “The bounce in rental demand after an initial drop-off shows that renters are starting to look at moving options for when the lockdown period ends.

“While it’s positive to see that there has been no mass withdrawal of properties by landlords, the pause on sales and lettings activity may simply mean they don’t have many other options.

“In light of this, measures like the Coronavirus Job Retention Scheme will be essential to ensure that landlords can continue to receive rent despite the financial pressures caused by the coronavirus pandemic.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Landlords warned to still make urgent repairs

The government has warned landlords that they are still legally obligated to carry out urgent health and safety repairs.

However, it clarified that non-urgent repairs should be done at a later date, as agreed between tenants and landlords.

The government issued the following the guidance: “Landlords remain legally obligated to ensure properties meet the required standard – urgent, essential health and safety repairs should be made.

“An agreement for non-urgent repairs to be done later should be made between tenants and landlords.

“Local authorities are also encouraged to take a pragmatic, risk-based approach to enforcement.”

The government said it is committed to supporting landlords as well as tenants.

The statement added: “We have also agreed with lenders that they will ensure support is available where it is needed for landlords.

“Landlords will also be protected by a three-month mortgage payment holiday where they have buy-to-let mortgages.”

Source: Property Wire

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Coronavirus to increase pain for already ‘squeezed’ landlords

The coronavirus outbreak will add to the pain for landlords who already have a raft of unpleasant rule changes coming their way next month.

With many people expected to experience a drop in income because of the pandemic, it’s highly likely tenants could struggle to pay their rent.

The Residential Landlords’ Association has recommended landlords work with their tenants and allow them to delay rent payments.

It told members: “A dip in income could mean a risk of rent arrears.

“Discuss this with your tenant and be flexible where you can – whilst a minority of tenants may use the outbreak as an excuse to avoid paying rent, most will be genuine and suffering stress.

“If there hasn’t been a history of arrears or delayed payment, then it’s better to accept the situation and work with the tenant to repay any arrears when things return to normal.”

Some banks such as RBS, NatWest, TSB and HSBC have allowed customers affected by coronavirus to defer mortgage payments, however the situation for buy-to-let investors is less clear cut.

Banks have said landlords struggling to pay their mortgage because of tenants falling into arrears will be dealt with on a case-by-case basis.

This will put a squeeze on landlords just as the taxman is poised to make life even more uncomfortable for them, says Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“Property was already one of the least tax efficient ways to invest your money, and cuts to tax relief from 6 April are set to make it even less rewarding.

“From the moment you pay stamp duty on your purchase, through the years of paying income tax on rent and until the day you finally pay capital gains tax on the sale, your property investments are making plenty of cash for the taxman.

“In recent years, landlords have been increasingly squeezed by tax changes, and from April, three different tax reliefs will be slashed – making life even more expensive.”

What’s changing on 6 April?

Sarah Coles explains…

Mortgage interest tax relief for higher rate taxpayers will finally reduce to the basic rate.

This has been gradually shifting since 6 April 2017. Before then, a higher rate taxpayer could have subtracted all their finance costs from the rental income before calculating the tax due.

Assuming they had no other costs they could have received rent of £10,000 and paid mortgage interest of £6,000, so would only pay tax on £4,000 – £1,600

From 6 April 2020, they’ll only get 20% relief on the £6,000, so will pay 20% on £6,000 and 40% on the remaining £4,000 – £2,800

Capital gains tax (paid at 18% for basic rate taxpayers and 28% for higher rate taxpayers on property) will have to be paid within 30 days of completion of the property sale.

It’s currently paid by self-assessment at the next available opportunity, so tax on a sale in May 2018 would have been paid in January 2020.

Landlords who previously lived in the property currently get private residence relief on the final 18 months they own the property: this will fall to nine months.

Let’s assume you bought in January 2010, lived in the property until January 2013, then rented it out and sold in January 2020. If you made a chargeable gain of £150,000, you’d pay tax on £82,500 – which for a higher rate taxpayer at 28% would be £23,100.

However, if you bought in May 2010, lived in the property until May 2013, then rented and sold in May 2020, with a chargeable gain of £150,000, you’d pay tax on £93,750 – which for a higher rate taxpayer at 28% would be £26,250.

Is property investment worth it?

Coles says: “If you’re considering property investment this crisis is a salutary lesson that interruptions in rent aren’t just a theoretical possibility –at the moment they seem to be a racing certainty.

“It’s also a reminder that it’s essential to factor tax into your considerations. The taxman’s take can make a big difference as to whether your investment will actually end up making you any money. And it can start to look even less appealing when you compare it to the fact you can invest in stocks and share.”

Written by: Joanna Faith

Source: Your Money

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Avoiding Problems When Renting Property To Tenants

We are at the start of a new decade and many landlords are panicking. New regulations, lots of new regulations, are making renting property harder. However, so long as you take care to keep up to date and follow the rules, you should be fine.

People will always want somewhere to live, and your investment should hold its value.

Using a good letting agent is of course one way to go. However, although many agents are great, others are not, and it is often hard to tell good agents from bad. There is really no substitute to learning as much as you can yourself about the renting regulations, so you can check that your agents are doing things properly. Or so you can save money by doing things yourself.

Here is a list of some of the preliminary things you need to do before you start advertising for tenants:

1. Protect your property at the Land Registry

This is probably the most important thing of all. If you rent a property to tenants but the contact address for the property at the Land Registry is the property itself, it is easy for dishonest tenants to borrow money on the security of the property, or even sell it without your knowledge.
Find out more from the video here https://youtu.be/uX6K-HIe1ZU featuring landlord and tenant solicitor David Smith, speaking at the Landlord Law Conference.

2. Check you have permission to let

There are a number of things to consider here:

  • Does your mortgage allow renting? If you do not have a ‘buy to let’ mortgage you need to check this out.
  • Is your property leasehold? For example, are you are planning on renting out a leasehold flat? If so, you need to check the terms of your lease. Some leases forbid subletting which means that you could be at risk of forfeiting your lease if you rent to tenants.
  • Does your insurance permit you to rent out the property? You need to be careful here as if you are using the wrong type of insurance your insurance company may refuse to pay out on claims. Check out my free Insurance Mini-Course here to find out more.
  • Is your property an HMO? It will normally be an HMO if you rent to three or more sharers who are not family members. If your property is an HMO you may need to obtain an HMO license – and there are fierce penalties if you rent a licensable HMO property while it is unlicensed. Find out more in our Free HMO 101 course here.

3. Make sure your property is in a proper condition

Once you are sure that you have all the necessary permissions, you need to make sure that the property is in a fit and proper condition before advertising it to let.

Landlords now not only have to comply with the repairing obligations (set out in section 11 of the Landlord & Tenant Act 1985) but also with the new legal obligations requiring property to be ‘fit for human habitation’.

Here are some of the other checks and inspections you need to do:

  • If the property has gas you need to get it inspected by a gas installer registered with the Gas Safe Register. They will provide you with a certificate which must be handed to tenants before they move into the property
  • You will need to obtain an Energy Performance Certificate which must also be given to tenants before they rent the property. Your property must have an energy rating of not less than E.
  • You must carry out a fire risk assessment and ideally keep a record of this. Find out more in the RICS Clear Guide to Fire Safety.
  • You must install a working smoke alarm on every storey of the property which is being used for ‘living accommodation’ and a carbon monoxide alarm in every room used as living accommodation where solid fuel is used (e.g. coal fires and wood burners). These need to be tested and shown to be in good working order on the first day of the tenancy. There is government guidance here. Note that at present this is only a legal obligation in England, but landlords in Wales are advised to fit alarms also.
  • You need to carry out risk assessments for legionella disease and keep records to show that this has been done.
  • You must ensure that all furniture provided complies with the furniture regulations.

4. Ensure that you comply with Data Protection rules

This is something that is often overlooked. However, it is important and there are hefty penalties for non-compliance.

Compliance is not hard though:

  • All landlords need to register with the Information Commissioner’s Office, and
  • Ensure that tenants data is kept safely in compliance with the data protection legislation (which applies to landlords)
  • Tenants also need to be given suitable data protection notices.

Find out more about this here.

5. Make sure you keep up to date

Law, rules and regulations change. For example, parts of this article could be out of date if you are reading it months after it was first published. So, it is really important that you keep up to date with developments.

By Tessa Shepperson

Source: Residential Landlord

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‘Temporary relief’ for tenants as fewer landlords hike rents

The number of landlords increasing rents declined last month but is still “worryingly high”, ARLA Propertymark warns.

The trade body’s October Private Rented Sector Report found that the number of tenants experiencing rent rises fell by eight percentage points in October, with 50% of letting agents witnessing an increase in rent prices, down from 58% in September.

This is the lowest figure since June, when the number of tenants experiencing rent rises was 55%, but it is still up compared with the 22% recorded in October 2018.

Agents reported that more tenants successfully negotiated rent reductions last month, at 1.6% from 1.2% in October.

Despite this increase, the figure is down year-on-year from 3.7% in October 2018 and 2.5% in October 2017.

Agents also reported an eight percentage point increase in stock per branch to 201 in October, from 193 in September.

This is up from 198 in October 2018 and 182 in October 2017.

Demand from prospective tenants remained the same with 72 registered prospective tenants per member branch.

David Cox, chief executive of ARLA Propertymark, said: “This month’s figures show some temporary relief for tenants. However, while the number of landlords increasing rents has fallen, year on year the figure remains worryingly high.

“Even looking at the increase in the number of tenants negotiating rent reductions, which should be a positive thing, when comparing year-on-year it is less than half of what it stood at in 2018.

“For far too long, successive governments of all political persuasions have passed significant amounts of complex legislation for landlords, making the buy-to-let market a less attractive investment, and this coupled with Brexit uncertainty and a looming General Election has left the sector strained.

“Unfortunately, rents are likely to remain high and tenants will continue to feel the pinch.”

By MARC SHOFFMAN

Source: Property Industry Eye

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What do tenants want from your UK property investment?

From bedroom numbers to proximity to local work and education hubs, a new survey reveals the amenities young British tenants prioritise, giving investors an insight into what makes the strongest investment property.

Summary:

  • Young UK tenants reveal the things they want when looking for a rental home
  • 40% of 18 to 24-year-old renters in the UK state bedroom numbers as being very important
  • A quarter also believe that it’s very important to live close to work or university, highlighting the need for investors to focus on prime city centre locations

Are you targeting the type of property that will attract and retain UK tenants?

New research, published by online comparison site GoCompare, reveals the things that makes a rental property attractive to young British tenants.

When asked what they look for when finding a new rental home, 40% of 18 to 24-year-old renters believe that the number of bedrooms a property has is very important, suggesting young tenants are prioritising one and two-bedroom homes and apartments over studios.

Location is also another key priority. 48% of young renters state that living close to work or university is somewhat important, while 25% believe that this is a very important factor.

30% of 18 to 24-year-olds also want to move into an apartment that’s unfurnished.

The survey also revealed that 40% of tenants did not state whether they wanted to own a home in the future or not, underlining the changing attitudes towards ownership in the UK. Separate research published earlier in 2018 suggests that up to one-third of millennials (those born between 1980 and 1996) will now rent their entire lives.

All of these things that tenants now demand is driving the growth of the purpose-built rental sector. Buy-to-let, formerly the UK’s preferred rental sector, can no longer deliver the type of high-quality property in central locations that young renters now want.

Instead, investor interest is now shifting towards prioritising modern, city centre accommodation that young tenants will pay a premium to access.

Source: Select Property

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Most Landlords Surprisingly ‘Normal’ According To Research

Two-thirds of private landlords have what is classed as ‘normal’ jobs, renting out property to supplement their main income.

New research from online letting agent MakeUrMove found that the most common occupations for landlords are jobs in IT, teaching and accountancy. Surprisingly, just 5 per cent of buy to let investors are full time landlords who own five properties or more, which suggests that very few landlords profit from large portfolios.

Although many landlords are in the business through choice, the number of accidental landlords has risen significantly in recent years. The research found that a mere 18 per cent of landlords became landlords through intending to create a property investment business. 16 per cent of landlords let a property that they inherited and 22 per cent became landlords through a range of circumstances, such as being unable to sell a home.

The fact that more than half of landlords own just one property refutes the conception that all landlords are wealthy.

Managing director of MakeUrMove, Alexandra Morris, said: ‘These figures shed some light on what British landlords really look like. The reality is that wealthy, multi-property owning landlords are quite rare. Most landlords are ordinary people working in normal jobs who are renting out a property to try and save for their retirement or to supplement their main income. With 53 per cent of landlords owning one single property, it’s clear that most landlords are not living off a portfolio of properties. They work as electricians, taxi drivers, hairdressers or social workers – they are just normal people who want to maintain healthy, stress-free relationships with their tenants.’

She continued: ‘We’ve found that a good number of landlords fell into renting their property through unforeseen circumstances such as inheriting a property or struggling to sell their own house. Many of these landlords start on a consent to let mortgages and later become buy to let mortgage holders, having a mortgage on the property means they are forced to pass on the costs to their tenants.’

Source: Residential Landlord

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Why the tenants are choosing private rented sector

With reports that a quarter of the population will be privately renting by the end of 2021, it is clear that the UK’s Private Rented Sector (PRS) is becoming an increasingly popular alternative to property ownership.

New data from insurers Direct Line for Business only goes to strengthen this argument, with a recent study revealing that 70% of UK renters have no intention of buying a home. The research supported the idea that the UK is moving toward a German Housing Model, where the majority of the population opt to rent, supported by government policy and encouraging attitudes toward long term renting.

In fact, further research shows that more people rent in Britain than almost anywhere else in Europe, with only Denmark, Austria and Germany having a lower percentage of home owners.

The reasons for this are varied but often come down to financial cost. With the average first-time buyer looking at prices double what they were just five years ago, it is understandable that home ownership is slipping through the fingers of younger generations, but interestingly that is not the only reason cited by responders for wanting to stay in the PRS.

The Direct Line for Business study shows that of the 12 million adults who said they don’t intent to buy property 22% said that the financial commitment of buying was a turn off, 9% said that they chose to rent so they could freely travel and 12% didn’t want to be tied to one place. An additional 22% commented that they didn’t want the hassle and cost of maintaining a property and would instead prefer a landlord to hold responsilbity for repairs.

Business manager at Direct Line for Business, Christina Dimitrov, said: “The UK housing market continues to change and we are seeing a major attitudinal shift when it comes to renting. While price is a factor, many people are increasingly comfortable with the flexibility afforded by renting a property rather than jumping into home ownership.”

The transition toward a new model of long-term renting is positive news for the future of the buy-to-let sector, with landlords able to support a growing pool of tenants and renters able to have greater choice in the market.

Source: Property Forum