Posts with tag: tenants

How will ban on letting agent fees impact landlords?

Published On: November 23, 2016 at 4:07 pm

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Categories: Landlord News,Tenant Fees Ban

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Today saw Chancellor Philip Hammond announce a ban of letting agent fees to be charged to tenants. Unsurprisingly, this move has not gone down well in the sector, with key industry peers fearing that these costs will instead be passed down to tenants.

However, research from TheHouseShop.com has revealed that the would-be financial impact on buy-to-let investors might not actually be as bad as first feared.

Fees

Data from the investigation shows that the average fees charged to tenants in Britain is around £300. In London, this figure rises to around £700.

Letting agents typically charge a buy-to-let landlord between 10-15% of their rental income for a thorough management service. Based on the average UK rent for October 2016 of £902 per month, this will amount to around £95 per month. This in turn is roughly £1,140 over the course of a year’s agreement.

When the additional cost of tenancy fees, (around £300) are factored in, this adds up to an extra £25 per month.

Returns

While this will undoubtedly leave some landlords upset, TheHouseShop.com feels it will not seriously harm their return on investment. Taking the average rent of £902 per month and the average UK yield of 5%, it has calculated the loss in rental income and yield from proposed increase in fees for landlords.

The results can be seen below:

Letting agents fees pictures

[1]

Nick Marr, co-founder of TheHouseShop.com, notes: ‘The figures above show that even if letting agents are forced to pass on the costs of tenancy fees directly to landlords, it will not have a significant impact on the landlord’s overall yield and profits. In fact, the additional loss in returns could be as little as 0.14% when compared to the existing landlord fees structure.’[1]

How will ban on letting agent fees impact landlords?

How will ban on letting agent fees impact landlords?

‘Some landlords will undoubtedly raise their rents as a result of the ban – as we have seen in Scotland – but many will be able to absorb the costs of this new system without substantial losses, meaning tenants should not face a barrage of rent rises once the ban is in place. The other side of the argument here is that perhaps it should be the letting agents themselves who swallow the loss in fees, but tight margins in the High Street lettings market make this an unlikely scenario,’ he continued.[1]

Ban

Addressing the wider impact of a letting fees ban for both agents and landlords, Marr said: ‘Opponents of the proposed ban are claiming that a “short term fix” may seem appealing at first, but that in the long run it will be tenants who suffer as landlords raise rents to cover the higher costs of agency fees.’[1]

‘However, this is not necessarily true. The extra financial pressure on landlords will almost certainly result in them shopping around and trying to find the best price, and as landlords explore alternative options to the traditional letting agency service, I have no doubt that we will see a significant increase in the number of private landlords taking a more DIY approach to renting their properties.’[1]

Concluding, Marr stated: ‘It essentially comes down to a trade-off between convenience and costs, and good, reputable, hard-working letting agents will still be able to justify their costs to landlords.’[1]

[1] http://www.propertyreporter.co.uk/landlords/how-could-the-ban-on-letting-agent-fees-actually-affect-landlords.html

 

Concerns raised over Airbnb short lets

Published On: November 22, 2016 at 12:10 pm

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Categories: Landlord News

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Concerns have been raised in the House of Lords over landlords who choose not to let properties to long-term tenants, but instead opt for less controlled short-term lets via Airbnb.

The issue was raised by Baroness Gardner of Parkes, who is herself a long-time landlord and has let properties in the capital for decades. Gardner raised the issue as part of the Renters’ Rights Bill.

Control

This measure concerns lets of six months or longer. However, Baroness Gardner warns that the Bill’s bid to exert greater control and costs on landlords and lettings could drive more into the Airbnb sector.

Baroness Gardner told peers: ‘People are overlooking the situation where, particularly in London, landlords are giving up ordinary residential lettings. There is quite a desperate shortage of lettings for ordinary people wishing to rent, because landlords can make so much more money out of Airbnb, which is totally uncontrolled. I opposed the practice when it came up last year during passage of the Deregulation Act, but no one else did.’[1]

Concerns raised over Airbnb short lets

Concerns raised over Airbnb short lets

‘Now, sure enough, Berlin is bringing in controls. New York, Vancouver—all these places—are finding themselves in the same position. The Mayor of London has acknowledged the problem. It is only capital cities that have ever had that limitation on short lets. Whether it is in the tenancy agreement or not, people are totally ignoring that and simply letting them, because they can earn as much in four months as an ordinary landlord would in the whole year’ she continued.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/house-of-lords-hears-of-concern-over-spread-of-airbnb-short-lets

 

Internet connection now considered essential for tenants

Published On: November 18, 2016 at 11:19 am

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Categories: Property News

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An interesting new survey has revealed that a reliable and affordable internet connection is one is the most important features that tenants look for when searching for a new property.

For many millennials, a good broadband connection is imperative, whether for work, study and entertainment reasons.

Essential

Research from LivingCom shows that high-speed internet is an essential component of renting a property. 96% said that a lack of internet when moving into a property is cause for massive frustration.

In fact, the survey shows that sub-standard connectivity can have a detrimental impact on rental values. Tenants will be harder to attract and of course, harder to retain. Three-quarters of young professionals questioned said that the are more inclined to rent a pre-installed internet service.

Paul Eaton, commercial manager at LivingCom, commented: ‘77% of young professionals own three or more internet-ready devices, so connectivity is key for the millennial movers and within three in four of this market lacking the funds to buy their own property, the private rental sector should be ensuring high-speed Wi-Fi and internet based services are delivered as an essential amenity, as soon as possible.’[1]

‘With 83% of 25 to 30 year olds having to wait more than a week to be connected in their new homes, it’s clear that high-speed internet connectivity needs to become an essential part of property development and a priority for landlords,’ he continued.[1]

Internet connection now considered essential for tenants

Internet connection now considered essential for tenants

Growing importance

Alternative research from Gocompare.com Broadband has indicated that a number of Britons see a good internet connection as more important than heating!

76% of people asked now view broadband as an essential utility, with 36% saying that they could not live without it. One if five people said that they would not buy or rent a home if there was a poor connection.

23% of 18-24 year olds said that they would go without heating for a week in favour of broadband. 15% said they would go cold for a month!

Ben Wilson of Gocompare Broadband noted: ‘These figures highlight just how important the internet has become in our daily lives, with the majority of people now considering it an essential utility like energy or water.’[1]

‘The internet has quietly become a vital part in many people’s day-to-day lives and as such it’s now more important than ever to make sure you’re with right provider at the right price.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/good-internet-connection-now-considered-vital-by-renters

 

Majority of People Want the Lettings Industry to be Regulated

Published On: November 18, 2016 at 10:34 am

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Categories: Landlord News

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The majority of people want the lettings industry to be regulated, according to a survey for the BBC’s popular Victoria Derbyshire show.

76% of people believe the lettings industry should face tougher regulation, including controls over letting agent fees, lengths of tenancies, deposits and inventory checks.

Majority of People Want the Lettings Industry to be Regulated

Majority of People Want the Lettings Industry to be Regulated

In addition, 74% want rent controls in the private rental sector.

Yesterday’s Victoria Derbyshire programme discussed the lettings industry and the results of its study.

The survey, of 1,002 people, also found that 69% believe rent rises when a tenancy is renewed should be capped, while 63% want the standard minimum lettings term to be increased to 12 months.

The accompanying BBC news story looks at three case studies, including a family with three children who have moved ten times in the last 12 years, and a tenant who was given 28 days’ notice to leave his home of five years, but struggled to find the money needed for a deposit, rent in advance, and letting agent fees for his next rental home.

The Chairman of the Residential Landlords Association (RLA), Alan Ward, told the BBC that although the idea of rent controls may seem “attractive”, they would be a “disaster” in reality.

He adds: “All experience of them shows that they lead to landlords cutting investment or quitting the market, reducing both quality and choice for tenants. The way to moderate rents is to encourage investment and boost supply.

“There are already well over 400 regulations affecting the private rented sector, and the actions of successive governments is raising the cost of renting.”

He continues: “The problem is not about a lack of regulations, but proper enforcement of them, and we support local authorities in their efforts to root out criminal landlords.”

A spokesperson for the Department for Communities and Local Government also says: “This Government is committed to creating a bigger, better private rented sector, with up to £10 billion in Government-backed guarantees to build more quality homes for rent.

“We are doing this without the need for excessive state regulation that would push up prices and make it far harder for people to find somewhere to rent.”

The Government’s blacklist of rogue landlords, which will also be controlled by local authorities, will be in operation from autumn 2017: /blacklist-rogue-landlords-operation-autumn-2017/

The Valuation Office Agency released statistics on the private rental sector in England yesterday. It found that the median monthly rent over the past year was £650. London had the highest, at £1,473, while the North East is the lowest, at £480.

Landlord Wins Council Tax Liability Court Case

Published On: November 17, 2016 at 9:34 am

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Landlord Wins Council Tax Liability Court Case

Landlord Wins Council Tax Liability Court Case

A landlord in Leeds has won a Council Tax liability court case, following an appeal by Leeds City Council. The Residential Landlords Association (RLA) has spoken on behalf of all landlords, saying it is pleased with the win.

The Appeal Court made the judgement that landlords are not responsible for paying Council Tax on a property after a tenant has moved out if the tenancy agreement hasn’t expired yet.

The appeal, brought by Leeds City Council, had demanded a landlord to pay Council Tax on five properties for periods when the homes were empty but either the landlord or his tenants had not formally ended the tenancies.

The tenancies in question were contractual periodic tenancies following a fixed term. The Council argued that a single tenancy cannot be both a fixed term and periodic contract. The landlord retaliated, saying that the contract created a single tenancy of six months and thereafter continued as a monthly tenancy. This would have the same effect as a fixed term Assured Shorthold Tenancy (AST), insists the RLA.

Leeds City Council appealed against a High Court rejection of its claim, saying there was no uncertainty of term and that the Council Tax liability remained with the tenant and not the landlord.

The RLA intervened in the case on behalf of all landlords.

David Smith, the Policy Director of the RLA, reacts: “The RLA is very pleased with this decision, which upholds the basic principles of tenure.”

Do you agree with the outcome of the court case?

The RLA has put together a helpful guide for UK landlords on who is responsible for paying Council Tax and when it is due: http://www.rla.org.uk/landlord/guides/liability_for_council_tax.shtml

Following this recent case, you will have the protection against paying Council Tax if your tenant has moved out, but the tenancy has not yet come to an end.

Letting Agents Profiting from Spiralling Fees, Believes Student Tenant Site

Published On: November 15, 2016 at 9:31 am

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Letting agents are profiting from charging spiralling fees for “no extra work”, believes a student tenant website.

A study by StudentTenant.com – a free-to-list student lettings platform – highlights the extent to which letting agents are profiting from higher rent prices.

Their “antiquated model” of charging a high commission to let a property still allows them to pocket sky-high fees, without conducting extra work, insists the organisation.

Letting Agents Profiting from Spiralling Fees, Believes Student Tenant Site

Letting Agents Profiting from Spiralling Fees, Believes Student Tenant Site

In the last 12 months, rent prices have risen to an average of £901 per month – up by 3%, which is higher than the current rate of inflation.

The lowest rents can be found in the North East of England, at an average of £530 a month. However, in London and the South East, it’s a completely different story…

The cheapest London borough for private tenants is Croydon, where the average rent is £1,170 per month. In Westminster, this rises to a huge £2,241.

Although the problem is considerably worse further south, rent rises have been felt across the country.

The UK’s greatest increase over the past year was in Lambeth, where rents rose by 12% to reach £2,874.

Only one part of the UK, Scotland, has seen a decrease in rents over the past year.

Some London boroughs have experienced rent declines, however, with Haringey seeing the greatest fall, of 6.4%. Prices are also down in Brent, Bromley, Kingston and Chelsea.

With the majority of regions and London boroughs seeing rent price growth, letting agents will also have experienced a bump in their earnings, StudentTenant.com points out.

The firm’s research puts the average letting agent fee at 12.7% of the total rent for the year, meaning the typical fee across the UK is over £1,300. In the South East, it’s more than £1,500, while those in Westminster charge a whopping £3,415.

Following a bumper rent price rise, letting agents in Lambeth can now charge £345 more than at this time last year.

But is this justified, asks the group.

“It’s really hard to justify the amount that a typical high street letting agent charges in the first place, let alone above inflation increases in most parts of the country,” insists its Managing Director, Danielle Cullen. “There’s a significant shortage of good rental stock, which means higher rents and yields, which can be great news for landlords, but not so great for tenants.”

She adds: “But when much of that gain is eroded by greedy agents taking a fatter and fatter chunk of it, 12.7% of what would otherwise be the landlord’s income in effect, then buy-to-let investors might want to think twice about resorting to an old fashioned high street-based rental firm.”

In order to protect tenants from spiralling fees, Citizens Advice has called on landlords to cover letting agent costs. Do you think this is a good idea? And would this deter you even more from using a high street service?