Friday, 23 August 2013

Growing Anger at Landlord Lenders

The boom in buy-to-let is hugely controversial. With house prices high and rising, and the supply of new homes woefully low, the idea that some people own more than one property makes other people seethe.

Last week banks and building societies said their lending to landlords was at its highest in five years, and more than 30pc higher than last year. This rapid growth – far outstripping the lacklustre growth in the mainstream, owner-occupier mortgages – is a part of a seismic change in Britain’s housing market.

On the one hand more people are renting, and renting for longer. On the other, more people are owning multiple properties to let. Lenders are playing a part in this social shift. For them, buy-to-let loans are good business where down payments are often large and the rental income a good security.

Low interest rates, the perennial subject of these pages, are another factor, because they encourage investors to seek higher returns on their capital than is available from the bank. Low interest rates also translate into cheaper mortgages, giving landlords higher yields. So this “boom” phase of the buy-to-let sector is set to continue.

But this shift in the housing landscape is causing unease and anger. And individual lenders, it seems to me, are coy about just how much business they are doing with landlords. You have to dig quite deep into the accounts of any one lender to get an idea of the scale of the business. Nationwide Building Society, for instance, lent £3.3bn to landlords in its last accounting year, representing a fifth of the market.

Against the wider backdrop of Nationwide’s entire mortgage book – over £135bn – the figure is small. But, interestingly, it is a hotspot of growth. Many of Nationwide’s regular owner-occupiers are repaying their loans quickly, causing that bigger part of the society’s lending book to grow relatively slowly. Landlords by contrast are taking on new debt, rather than repaying it. So looking at Nationwide’s lending on a “net” basis – after repayments are taken into account – I estimate that for every £3 lent to home owners living in their property, the mutual is currently lending £1 to landlords.

Mainstream mortgage business is now picking up, Nationwide says, but clearly if its lending continued in the same pattern the proportion of borrowers who are landlords would rise over time. As at the end of April, “specialist” mortgages – almost all buy-to-let – made up almost 16pc of Nationwide’s loans. That is up from 12pc in April 2010.

Readers logged on to last week to debate the wider subject of the buy-to-let boom. This is what one said: “I have savings in the Nationwide, but that will end tomorrow. I invested thinking I was helping people buy their first homes, not buy-to-let landlords.

“This was not what building societies were set up for. Banks are as much to blame. No one going to a bank with a business idea and collateral could get a loan over 25 years – but landlords can.

“My money is out of Nationwide tomorrow and a strong letter to the chairman will follow.”

Nationwide’s chairman will doubtless reply that landlord lending is profitable and as such helps all members of the society, including first-time buyers, where Nationwide has a good record. But the discontent and controversy surrounding buy-to-let are likely to grow.

Other lenders are also in the spotlight. Lloyds Banking Group is probably the single biggest lender to landlords, something that many taxpayers – who rescued the giant group in the midst of the financial crisis – will find disturbing.

Friday, 16 August 2013

Britain's Best Places to Invest in Property

It’s not merely a false dawn rising over the rooftops. Following years of doom and gloom, UK house prices are finally on the up. According to the Office for National Statistics, values rose by 3.1 per cent in the 12 months to June 2013, compared to 2.9 per cent in the year to May 2013.

Confirmation comes from the Royal Institution of Chartered Surveyors (RICS), which says that prices are rising at their fastest rate since the pre-crash days of 2006. “The increase is spreading from London and the South East, but this is the first occasion for a long time that we have recorded increased activity everywhere in the country,” explains RICS director Peter Bolton-King.

This is set to continue, with an expected increase of seven per cent in 2014, according to Howard Archer, chief UK economist at IHS Global Insight.

There are three factors credited for this surge in buyer interest. One is the government’s Help To Buy scheme. The second is the Funding for Lending scheme, which allows banks to borrow money more cheaply. The third, meanwhile, is the Bank of England’s recent indication that interest rates will remain at record lows for some time.

Given this sunny forecast, canny buyers may need to move fast to snap up bargains. Here are six of the best investment hot spots:


A 4.3 per cent year-on-year price rise is reported for Wales, which previously saw some of the UK’s largest house price falls during the recession. “Activity in July was much better than in June,” says Nigel Jones of John Francis Estate Agents in Carmarthen. “Sales agreed were up by eight per cent, and sales exchanged by 11 per cent.”

West Midlands

This area has seen the greatest number of interested buyers since records began in April 1999. Both new stock and new buyers are in plentiful supply, particularly in Worcester. “In our country house department, we have seen several deals come to fruition in the past few days, from £300,000 to £750,000. And that’s in traditionally quiet August,” says George Pickard of Halls estate agents. “We are definitely seeing a more confident market.”


“There has been increased activity in recent months, and the feeling that a corner has been turned,” says Alex McNeil of Huddersfield estate agent Bramleys. He has 30 two- to three-bedroom properties on the market in the £120,000-£130,000 range. “We are experiencing a general feel-better factor.”

Luke Whitaker of Jowett Chartered Surveyors agrees. “The market is still buoyant, in terms of vendor inquiries and an increase in market appraisal requests. This suggests positive market changes.”

North East

The area has seen the highest level of interest for 14 years, according to the RICS. Surveyors report that prices are generally rising rather than falling for the first time since January 2012. The location most in demand is Jesmond, where four- to six-bed homes fetch more than £500,000: three times what they would have cost in the Nineties.

Leighton Buzzard

This is an area in which property website Zoopla identified a sudden, downward dip. Here, the average over the past three years has been as low as £230,000 for a semi-detached house. Just 33 miles to the south, in Buckinghamshire’s Gerrards Cross (35 minutes by train into London), house values are 60 per cent higher, around £655,000. Now is the time to invest before the Bedfordshire market bounces back.


Far from scanning the horizon for non-existent buyers, Cambridge estate agents are pitting purchasers against each other.

“Every house we have sold so far this year has gone for the guide price or above,” says Ed Mayer of Savills. “Exactly 50 per cent of sales have sold in competition, too, either in sealed bids or during open rounds of negotiations. The largest offer was 21.53 per cent above guide price.”

No doubt about it, says surveyor Mark Wood of Bradshaws. “We have had an extremely high volume of sales throughout July, with a lack of available properties resulting in prices increasing.”

The only cloud on the horizon, it seems, is that this shortage of supply will lead to a sudden surge in prices, rather than a gradual ascent. For the moment, though, there is no rain falling on the UK property parade. Find the right place to invest, and the result could be, if not pounds, at least pennies from heaven.

Tuesday, 13 August 2013

Councils are to Blame for Rising Rents

Landlords are increasingly come under attack for sky high rents – but if you want to find the real reason rents are rising, then look no further than your local council.
Councils are to blame for rising rents
Read any of the many landlord forums on the internet and you’ll come across the same scenario again and again: a landlord has issued eviction proceedings against a tenant, but the tenant is advised by the council not to budge until the bailiffs arrive.
Going through the proper eviction process can take months and cost the landlord thousands of pounds – more if the tenant has stopped paying the rent.
Yet local councils do nothing to help. In fact, they do just the opposite. And their stance doesn't just cost landlords money but other tenants too.

Council policy

Landlords might want to evict a tenant for any of a number of reasons. Perhaps the tenant has fallen behind on the rent, broken the terms of the tenancy agreement or damaged the property. In some cases the landlord might need the property back to live in themselves.
Tenants with nowhere to go might approach the local authority to house them, but local Government housing officers repeatedly come out with some controversial advice: they tell tenants not to leave their current accommodation until the bailiffs arrive.
This means ignoring either a section eight or section 21 notice to move out (either notice will give a tenant at least two months to leave) and then, subsequently, a possession order from a court. Once the possession order has passed, landlords can get a warrant for possession and send the bailiffs round to evict the tenant.
In general councils view any tenant who’s left their previous accommodation before the bailiffs arrive as “intentionally homeless” and so refuse to re-house them.
Dubbed “gatekeeping”, this policy effectively keeps official homeless numbers down, despite the fact that the policy causes havoc in the private rented sector.

Conflicting laws

Council housing officers are in effect encouraging tenants to break the law. A possession order is an order of court issued by a judge and tenants could be held in contempt of court for ignoring it. However I’ve yet to see a tenant prosecuted for this.
Landlords, on the other hand, can end up in court or be fined for any number of misdemeanours such as not having a gas safety certificate or protecting a tenant’s deposit.
Landlords can also end up in hot water if they 'harass' a tenant, even if the tenant has long stopped paying the rent.
It doesn’t seem fair, does it?

Effect on landlords

One of the most common reasons landlords evict tenants is for rent arrears. If a tenant stops paying rent landlords have to go through a time-consuming and expensive process to evict them. In many case tenants can remain in a property for six months or more without paying a penny.
While anti-landlord campaigners might think a cashflow problem is little more than landlords deserve, it pays to look at the bigger picture.
All the time a property is occupied by non-paying tenants, it’s not available to paying, law-abiding tenants. The problems of supply and demand in the private rented sector are well documented – there aren’t enough properties available to rent, so landlords can achieve high rents for properties they do have to let. Anything that decreases supply further simply adds to the supply and demand problem and pushes rents higher still.
Meanwhile, when the landlord eventually gets possession of their property they’ll be looking to re-let it as soon as possible so it can start generating income again. This means they won’t have a lot of time or cash to refurbish it or fix anything that’s broken which means the standard of accommodation falls.
Finally, in a bid to recoup their losses, the landlord is likely to up the rent for the next tenant.

Effect on tenants

Council advice can put tenants in a catch-22 situation. If they want or need council help to be re-housed they have to do as the housing officer suggests, but this means ignoring a possession order from a court. If the landlord decides to pursue them for unpaid rent or the costs of eviction the tenant could end up with a county court judgement (CCJ) in their name.
A CCJ has numerous effects on an individual. It will make it difficult to borrow money, rent another property, buy a property and, in some cases, get a job.
Meanwhile living in a property you’re being evicted from isn’t fun. Tenants may feel guilty about the way their landlord’s being treated, especially if the landlord-tenant relationship has been good up to that point.

Monday, 12 August 2013

The Alternatives to Landlord Licensing Schemes

The alternatives to Landlord Licensing Schemes require joined up thinking, changes to data sharing protocols within local authorities and revised high level directives and strategies which must begin at Government level.

Alternatives to Landlord Licensing Schemes

If society as a whole desires that people should not be subjected to sub standard housing conditions then society as a whole must pay to enable this (howsoever that might be done) whether the money is raised at a local level or centrally.
It is both unacceptable and wholly undemocratic that landlords should be singled out to fund any related initiatives.

Please note that costs of licensing imposed on landlords are funded as a result of increasing rents. Neither landlords nor tenants want this, particularly as there is clear evidence (demonstrated in this article) that landlord licensing schemes have proven not to be an effective solution to the problems in the Private Rented Sector.

Recycling of Court awarded penalties

The high costs associated with prosecuting criminal landlords is borne by Local Authorities, however, fines and penalties go to the treasury. If these funds were to be redirected to the prosecuting authorities this would assist funding of additional prosecutions and the incentive to bring more criminal landlords to task.

Improvements to PRS housing standards for benefits claimants

Our suggestion is that Local Authorities should check to ensure they only pay housing benefits to fit and proper landlords who provide decent accommodation. That would be what any responsible parent would do if paying for their offspring’s accommodation. In this case, the state is effectively in loco parentis. It is proposed that payment of Housing Benefits to landlords are suspended following unsatisfactory checks until such time as properties are brought up to acceptable standards. The proposed quid pro quo to landlords is direct payment of rent before the benefits cap is applied. The logic for direct payment of rent to landlords being the first payment is that shelter is one of the most basic requirements for human existence and should, therefore, be the first welfare benefit to be paid, not the last as it is now. Clearly this impacts significantly on the Universal credit proposals which have been widely contested by the PRS and Housing Charities alike.
The above would require inspections prior to new housing benefits being granted. This would also enable phasing in as opposed to having to asses every property within a defined timescale.
The enforcement teams currently in place within the public sector to tackle problems in the PRS are:-
  • Environmental Heath Officers for property conditions,
  • Planning Enforcement – for unauthorised conversions which seriously brings down standards across the board.
  • Tenancy Relations Officers for harassment and illegal eviction
  • Benefit Fraud to tackle widespread scamming
  • Trading Standards for sharp practices amongst agents
  • Anti social behaviour teams
Outside of the council are:-
  • EDF revenue to tackle cannabis factories and theft of electricity
  • British Gas revenue for theft of supply.
  • Police Community support officers and the Police.
Put them all together and you have quite an army. This is what a visiting team would need to do.
  • Visit the property and check for breaches of HHSRS.
  • Check gas safe certificates
  • Phone the planning team if it’s a conversion to ascertain that all has been done with permission. (3 minutes)
  • Land reg check to ensure the person you are dealing with is actually the owner (£3 and 2 minutes)
  • Experian check for the same reasons as above (£6.99 10 seconds)
  • Council tax check for any outstanding bills and history of use (5 minutes)
  • Check past Housing Benefit claimants which cross references info you have about landlord (5 minutes)
  • Call to EDF and British Gas to make sure all utilities are above board. (5 minutes & free)
  • Run companies search to check solvency. (Free or just £2 for a director check)
  • If landlord is not resident in UK check NRA certificate. (free)
  • Run landlord or company name through Google (You’d be amazed what comes up sometimes & free)
  • Call Environmental Health Officer to see if they have any dealings in the past with the property or the landlord/agent. (2 minutes & free)
The problem is that it is only in sporadic circumstances that any of these teams and organisations talk to each other on an unofficial basis. Often they have different computer databases, so a person might be receiving a grant from one council team while another team is prosecuting them for fraud or failing to pay council tax. Councils do work in this way in other circumstances. MAPPA panels made up of homelessness workers, social workers, Police, probation officers, etc have been common place for years tackling those who are a danger to the community.

Fair and reasonable HMO licensing in Birmingham

Reasonable progress has been made in Birmingham to bring about a major change in the structure of their HMO licence fees. In a nutshell good landlords, who have become accredited through an education based scheme, are given a big discount on their licence fee. Good landlords who are members of recognised landlords associations are given a further discount. This has reduced the licence fee from £1,150 to £850 but is still questionable. The cost of these discounts is being recovered by charging the bad landlords. When the Local Authority has to trace and chase a landlord and force him to licence he will be charged the full amount without discounts, regardless of accreditation or landlords association membership and a one year licence is granted. At the end of the year the landlord has to pay the full fee again and is then granted a normal five year licence. This proposal was made by National Landlords Association and Birmingham City Council accepted the model on the basis that bad landlords who increase their enforcement costs  should pay, not as happens in other areas. The same structure applies to the licence renewal.
Whilst we support the basic principals used in Birmingham we must point out that we do not support Additional Licencing and/or Selective Licencing. The requirement for compulsory licencing of any type of HMO is questionable based on our first set of suggestions.

Failed or failing Landlord Licensing Schemes

Landlord Licensing in Scotland has been in place for 7 years, Housing Charity Shelter said “We conclude that landlord registration is not yet fulfilling the expectations placed upon it; indeed, that it may not be able to do so.” in this report.
The Salford Landlord Licensing scheme was a failure admitted by the Local Authority but there are plans to extend it. Isn’t doing the same thing and expecting different results supposed to be a sign of madness? See this report.
The Oxford scheme has become a bit of a joke, check out this thread based on a freedom of information request to Oxford County Council.

Sources of information and how you can make a difference

Sources of information are linked.
This article has been compiled from a long discussion here on Property118.
If your local authority intends to introduce a new form of licensing these suggestions will give you options to propose alternative solutions. You may obtain a copy of this document as a PDF to present to your local MP and/or to submit in response to public consultations by completing the form below.
Why not write to your local MP (Member of Parliament) about this and ask him/her to raise the matter in the Houses of Parliament and with his/her Local Authorities?
If you do not have the contact details of your local MP, please see >>>

Remember, increased licensing results in increased rents. Together we can make a difference.

Landlords and tenants combined = over 5 million votes!

Friday, 9 August 2013

Buy-to-let boom powers ahead with lending up 31%

Lending on buy-to-let has raced ahead again, industry figures showed today, with the value of loans extended up 31% on a year earlier.

The resurgence of property investment has sparked controversy with so many Britons priced out of buying and rents rising rapidly.

The Council of Mortgage Lenders (CML) data showed £5.1bn was advanced to landlords in the three months to the end of June, up 21% on the first quarter.

Bank of England Governor Mark Carney's clear indication yesterday that rates will remain low until at least 2016 is likely to spur further growth in the sector. This is partly because mortgage costs for landlords, already low and falling, are expected to become more attractive. But low returns on other assets including cash are also driving savers toward investments in property.

Overall, lending to landlords remains substantially below its all-time high of £12.7bn in the third quarter of 2007, at the peak of the pre-crisis housing market. But the sector is now mushrooming at a time when wider lending to owner-occupiers is still weak. As a result buy-to-let loans now make up 13% of gross lending, the CML said.

The net lending figures, which are buried in the CML's data, are more telling. These show the rate of growth of lending in the sector after capital repayments are taken into account, revealing the sector's real expansion.

Repayments for the latest quarter totalled £1.7bn, giving a net lending figure of £3.4bn. Net lending in the wider mortgage market is only just edging out of negative territory. The contrast shows how landlord lending has become an area of exceptional growth for lenders.

The biggest lenders to landlords continue to be Nationwide Building Society, Lloyds Banking Group (through its BM Solutions division) and a secondary tier of players including Coventry Building Society and Clydesdale Bank.

George Spencer, chief executive officer of Rentify, the online lettings company, said: "It is not just the residential mortgage market which is picking up dramatically - the buy-to-let market is also seeing renewed confidence from landlords, with the number and value of loans at their highest level in five years.

"This growth is fuelled by a renewed appetite from investors - both experienced and novice alike, along with better availability of buy-to-let mortgages at lower rates and with looser criteria than at any time in the past five years."

He added: "We expect the market to continue to grow at an impressive rate in coming months. We are adding rental properties to our website at the rate of 600 a week and now have 140,000 landlords and tenants registered with us as both sides look for alternatives to traditional high-street letting agents.

David Whittaker, managing director of Mortgages for Business, a specialist landlord broker, said: “The buy-to-let market is in rude health. The Bank of England’s forward guidance on interest rates has given investors more confidence, which should translate into further activity. Rates are at record lows – and now look set to stay that way. Demand for rental property remains red-hot. Yields are north of 6% on typical rental property, and will stay that way while housing stock remains in such short supply."

The CML's head of policy Jackie Bennett said: "Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages. These conditions are creating more opportunities for landlords to remortgage."

Thursday, 8 August 2013

Tenant Ordered to Pay £27,100.01 in Rent Arrears and Damages

A social landlord has secured a possession order against a tenant with the highest rent arrears in Salford.

Julie Flesh was also responsible for causing thousands of pounds worth of damage to her home on Antares Avenue in Lower Broughton.

Landlord Salix Homes discovered that Flesh, who moved into the property in 1999, had actually abandoned the home in 2009.

However, the 44-year-old failed to inform Salix that she had moved out.

During a trial at Manchester Civil Justice Centre this week, the court heard that a raid the property by Greater Manchester Police in October 2010 uncovered the remnants of a cannabis farm (pictured).

Salix subsequently found the property to be in a severe state of dereliction with damage totalling £17,435.

The home was declared uninhabitable and the extensive damage included holes in the roof, structural damage and severe damp. The electricity metre had also been bypassed.

During the two-day trial Flesh admitted she had not lived in the property since July 2009 and claimed to have given the keys to her sister Victoria Flesh, who in turn gave the keys to an anonymous third party who she allowed to live at the property.

Victoria Flesh refused to tell the court who the third party was.

Julie Flesh denied any knowledge of a third party living at the property and claimed she was unaware of the existence of a cannabis farm. She claimed she had last visited the property in July 2010 and found it in good order.

This was refuted by District Judge Harrison, who said the third party would have been living in the property at that time. He said: "In July 2010, on the balance of probabilities, the property would have been damaged and even if it had not been damaged the third party would have been seen. I have come to the conclusion that the defendant was well aware of the occupation of the property and the damage to the property."

The court heard how Flesh was in breach of her tenancy agreement by failing to live at the property, by allowing an unauthorised third party free access to the house, by failing to prevent the cultivation of drugs, by allowing damage to the property and by failing to pay her rent.

Flesh had not paid any rent since February 2011 when her housing benefit was stopped after Salix alerted the benefits agencies that she was not living at the property. A total of £9,665,01 in rent arrears has been accrued - the highest of any social housing tenant in Salford.

The judge granted an outright possession order to Salix and Salford City Council and Flesh was ordered to hand back the property within 14 days.

She was also ordered to pay £27,100.01 to cover the cost of the rent arrears and the damage to the property.

Wednesday, 7 August 2013

Landlords targeted by 'no win, no fee' lawyers

Landlords who fail to full comply with the Tenancy Deposit Protection (TDP) law could face a claim for compensation even if their tenants' deposits are fully protected.

TDP schemes have been subject to a growing number of information requests by 'no win no fee' claims companies targeting landlords on behalf of tenants, according to Carolyn Uphill, chairman of the National Landlords Association (NLA).

Speaking on BBC Radio 4 You and Yours, Uphill warned landlords In England and Wales to ensure that they pass on important information about where and how any deposit is protected – known as the Prescribed Information – to the tenant within 30 days from the start of the tenancy.

Failure to do so could lead to heavy penalties and claims companies seem to be inviting tenants who haven’t received their prescribed information to make a claim against their landlord – even if the deposit is protected.

Uphill said: “You have to ask where the financial loss for the tenant is. The majority of tenant’s deposits are being protected and 99% cent of tenancies end without any issues over the return of the deposit. Where problems do arise, the tenant has access to a free and impartial decision using the scheme’s dispute resolution service.

“Of course, where there is blatant disregard for the law landlords can have no argument and must be brought to rights. However, these claims firms are looking to exploit those landlords who have protected their tenant’s deposits but may not have properly issued the prescribed information.

“In practice this could simply mean not providing their tenant with a leaflet about where the deposit is protected.

“This sort of action is morally questionable, unnecessarily punitive and will only work to undermine the good relationship that exists between the majority of landlords and their tenants”.

Eddie Hooker, CEO of Tenancy Deposit Scheme My Deposits, said:

“It has always been the landlord’s responsibility to protect the deposit and a vital part of the process is to pass the Prescribed Information on to the tenant.

“Landlords must be aware that they are ultimately responsible even if they use a letting agent. Our advice is to check with your agent or directly with your deposit protection scheme to ensure all of your deposits have been properly protected.

“Those who fail to comply with either step of the legislation leave themselves open to potential fines of up to three times the deposit value and could fall prey to these kinds of claims companies.”

Monday, 5 August 2013

NLA slams licensing schemes

The statement, made by the new chair of the NLA Carolyn Uphill, came after the news that Liverpool City Council are preparing a business case to implement a selective licensing scheme.

Uphill said: “The trouble with selective licensing is that it only catches those landlords doing things right but don’t have the correct piece of paper. One of the objectives is to stamp out anti-social behaviour but landlords do not have the power to do anything about this.”

Uphill, who previously worked as a local representative for Manchester, used the example of Manchester City Council which chose not to renew its selective licensing scheme, to highlight the scheme’s shortcomings.

She said: “Manchester scrapped the scheme because it decided that it did not make a difference to standards within the private rented sector and it was able to bring about large prosecutions without it.”

The aim of selective licensing is to ensure landlords manage their tenancies effectively by reducing anti-social behaviour. But according to Manchester City Council the scheme does not have enough enforcement powers to secure a prosecution against the landlord for not managing a tenant’s behaviour.

Officers would need to prove anti-social behaviour with a caseload of evidence and then prove the landlord had not taken reasonable steps to tackle the behaviour all without input from either party.

This makes it difficult for officers to gather sufficient evidence to prosecute landlords due to anti-social behaviour.

A Manchester City Council spokesman said: "We found that selective licensing did not achieve the outcomes we wanted; dealing with anti social behaviour through improved management standards and improved property conditions while remaining good value for money.

"Responsible landlords often came forward quickly but the time required to process the applications, chase up paperwork and inspect properties pulled the focus away from targeting and enforcing poor landlords to raise standards so the main aim of the scheme could not be effectively achieved."

Click here to read the original article: "NLA Slams Licensing Schemes"