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Em Morley

Why the Immigration Bill needs to be amended

Published On: February 25, 2014 at 5:00 pm

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The controversial Immigration Law continues to be debated between MP’s and landlords alike. With landlords gearing up to potentially having to conduct more stringent checks on prospective tenants, opposition is growing.

With the Immigration Bill imminently reaching the House of Lords, there are a number of reasons why the coalition could be forced to reconsider their plans:

The bill is too confusing for landlords and letting agents

It is simple to check whether or not someone has the right to live within the United Kingdom if they have a British passport. However, many landlords could be forced to chase and scrutinize dozens of alternative documents in order to ascertain a person’s eligibility to rent in the UK. This could prove confusing and costly if landlords make a genuine mistake, with fines of up to £3,000 for those who let properties to illegible tenants.

There will be fewer lodgers

Under the proposed Immigration Bill, potential lodgers in a rented property will also have to face eligibility checks. It is argued that this will have a detrimental effect on those tenants struggling with their mortgage payments. This will also discourage tenants paying bedroom tax.

Why the Immigration Bill needs to be amended

Why the Immigration Bill needs to be amended

 

Discrimination

Forcing landlords to conduct such checks could lead them to discriminate against ethnic minorities and foreign nationals. The Scottish Association of Landlords has already stated that legitimate tenants could be discriminated against, particularly those whose residency status is unclear.

The most likely people to be affected are those who have left their previous residence quickly and do not have sufficient documentation. There are also fears that many genuine immigrants will be discriminated against by rogue landlords.

Councils will be overworked

It is feared that immigrants discriminated against or being provided with sub-standard housing will turn to their local authorities. A large number of local authorities across the UK are already pressurised to deal with issues such as demand for temporary accommodation and homelessness.

Rents and Housing Benefit will increase

One major concern attributed to the proposed bill is that agents, if allowed to perform the checks, will charge for the process. The same goes for landlords who conduct the checks themselves, leaving tenants further out of pocket. Landlords will seek payment for their extra workload, in addition to any professional support.

It could be highly embarrassing for the Government

The home-secretary recently described the immigration branch as a, “troubled organisation”, that has struggled to cope with its workload. It is estimated that under the bill, landlords will submit up to around 10,000 daily status checks, further increasing the pressure on the branch. A spokesperson for the Immigration Law Practitioners’ Association said, “this project sets the Home Office up to fail. Again.”[1]

It is proposed that the landlord immigration checks should either be taken out of the bill, or piloted and assessed in small numbers before they are introduced on a broader scale. A code of practice has also been mooted by the Home Office. Whatever conclusion is drawn, it is clear that there are a number of issues to consider and debates to be had before plans for the Immigration Bill are finalised.

[1] http://www.theguardian.com/housing-network/2014/feb/11/immigration-bill-landlord-checks-mark-harper

 

 

Landlord Insurance Key Trends to 2017

Published On: February 20, 2014 at 3:02 pm

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UK landlord insurance is estimated to have made £2.51 billion in gross written premiums in 2012, and produced 7.3% of the country’s non-life insurance category.1

Landlord Insurance Key Trends to 2017

Landlord Insurance Key Trends to 2017

Landlord insurance policies cover the possibilities of risks in renting a residential or commercial property, including damage to buildings and contents, loss of rent, and public liability.

Strength in the sector continued throughout the recession and financial difficulties of 2008-11, when the stagnant housing market caused a rise in rental accommodation.

This marked the turnaround from post-war homeownership, with almost 35% of properties rented through private or social housing landlords in 2012. This was a 5% rise from 2000.

Furthermore, the move to rental properties is also likely to have caused a growing demand for landlord insurance, as a consequence of greater risk aversion, a high number of homeowners decided to rent out their old homes, unemployment causing an increase in the amount of tenants in rent arrears, doubtful businesses dropping their commitment to long leases, and a rise in weather-related incidents.

There are chances that the sector will progress further also. Insurer-led studies have revealed that consumers are not property aware of the insurance cover required for landlords, as a quarter of residential landlords only take standard home insurance. By moving to suitable landlord insurance, there will be large growth potential for premiums in this group. Looser credit conditions and a rise in buy-to-let lending imply further favourable possibilities.

However, the future of available flood insurance is not certain. It has been confirmed since the move from the Statement of Principles to the Government Flood Re plan, that affordable flooding insurance will only be provided for resident homeowners.

Therefore, insurance premiums for landlords are predicted to face additional difficulties in the coming months. Industry experts expect that the number of properties that could be affected is one million.

1 http://www.landlordexpert.co.uk/2014/02/19/landlord-insurance-in-the-uk-key-trends-and-opportunities-to-2017/

 

 

Landlords Guide to Rent Arrears

Published On: February 18, 2014 at 2:37 pm

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The National Landlords Association (NLA) has released a guide on helping landlords deal with, or prevent, rent arrears.

Rent arrears are one of the biggest risks that landlords face, as lack of rent payments can have a huge impact on their letting business.

Following the NLA’s Effective Letting campaign, the guide is designed to emphasise good practice and avoid common problems. This will reduce the risk of issues such as rent arrears, and ensure a positive tenancy for all involved.

Debt can signal real trouble for property investors, as landlords are not able to simply end a contract if they do not receive payment. However, landlords are always obliged to maintain their responsibilities.

After non-payment, the court can only terminate a tenancy agreement. At this stage, vacant possession is only granted if two months of rent has been missed.

As the housing industry is so significant, protections must be in place to avoid landlords and agents abusing their position.

But this can cause problems for landlords who must reduce any risks, cope with issues if they arise, and continue earning a living.

It is not immediately obvious which types of property or tenants could lead to rent arrears. Due to the range of people it can affect, it can be hard to identify specific tenancies that will experience this problem. However, there are still a number of signs that can avoid further damage.

Landlords can plan their spending to prepare for any possible issues in the future. The NLA advise to plan the letting business on the basis of ten out of 12 months rent. They believe that this will allow for unexpected costs, and help to cover payments if these problems arise.

Landlords Guide to Rent Arrears

Landlords Guide to Rent Arrears

This will not, however, solve any problems that the tenant may have. Before entering a new tenancy, landlords can put in place protections to reduce troubles.

Landlords should thoroughly vet tenants to find out as much as possible of their personal circumstances. Common checks include collecting proof of income, an employer’s reference, and a previous landlord’s reference.

These checks will determine whether the tenant has sufficient income and no recent history of non-payment. Conducting a credit check can also highlight any debts.

Landlords could use a professional tenant checking service, such as the NLA Tenant Check, to gain an efficient and detailed check.

If appropriate checks have been undertaken, there are insurance options to further protect against loss of rent.

Landlords should fully understand what the cover includes, and which is most suited to the individual tenancy.

Some options request certain tenant references, which could restrict some tenants from being covered. The length of cover is also important to consider, as some will not protect if arrears arise later on in the contract.

It could also be wise to require a guarantor, a practice that is commonly used in student properties. The guarantor will provide payment if the tenant cannot.

Guarantors should live in the UK and own their own home. Guarantors should be fully aware of their duty, and should be in place for the whole duration of the tenancy.

Landlords should sometimes use their experience and instincts to try to understand if a tenancy will work out. This does not mean being judgemental of all prospective tenants, but some serial bad tenants will use similar tactics to appear risk-free. Noticing these and ensuring they do not cloud the landlord’s judgement could avoid problems in the future.

If something does not feel right, professional checks and suitable insurance can cover any doubts.

The tenancy agreement should detail how and when the rent is paid. If weekly rent is specified, then the landlord should provide a rent book.

Landlords should stay on top of payments, keeping receipts and enquiring immediately should payment not be made. A polite inquiry is completely acceptable. It may then be revealed that there was a banking error or admin issue. Tenants may have made a simple mistake. This way, landlords can work out problems with the tenant and allow for honesty. It should always be stressed that tenants should pay on time.

If the troubles seem to be more serious, a meeting should be set up between landlord and tenant to discuss the situation. Landlords should remain professional and keep records of all communication.

At this stage, landlords may be able to make a payment plan with tenants, which would help both parties resolve the issue. If the problems seem more serious and long-term, the option of ending the tenancy may be wise. Landlords should also suggest support from the Government.

If the tenant has landed in difficult circumstances, then they may be keen to end the tenancies. If both the landlord and the tenant believe this is the right outcome, both can leave the arrangement and move to more suitable options.

However, landlords cannot end the tenancy without the tenant’s consent, unless they receive a court order. If a landlord tries to make the tenant end the agreement without this, they could be prosecuted for harassment or illegal eviction.

A strong landlord-tenant relationship can avoid these problems. It is important for the landlord to understand that the tenant will also probably have a lot of stress and pressure at this point, and the landlord should try to work out the best way to resolve the issue.

The reasons for falling into rent arrears should be identified as to assess the future. Most cases arise from a loss of income. In this case, the tenant may be eligible for housing support.

If they are more comfortable looking elsewhere for help, then the landlord can suggest:

If a payment plan can be agreed, this will allow the tenancy to continue, and both parties to work alongside each other.

If the tenant does end up moving out of the property, they can aid in the marketing process for replacement tenants, for example by assisting with viewings.

If a large amount of rent is owed, and there is a negative landlord-tenant relationship, then the case must move to court, where the landlord will seek possession, and a potential financial aware. The landlord should always obey proper practice and stay professional.

How renters can avoid major renting pitfalls

Published On: February 17, 2014 at 2:55 pm

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There are various ways that landlords can run checks on prospective tenants, but very little that tenants can do in return. However, there are a number of measures that tenants can take to ensure peace of mind when renting a property.

Fraudsters

The rising demand for rental accommodation across the United Kingdom has seen a number of fraudulent landlords attempt to cash in on needy tenants.

Cases of fraudsters advertising properties that have already been rented out, renting to multiple unknowing occupants at the same time or even advertising properties that don’t exist are becoming increasingly common.

Problems are also occurring with mortgage permissions of rental properties. In some cases, properties are being rented out by the real landlord, but without permission of their mortgage company. By doing this, landlords are in breach of their mortgage terms which could, in extreme cases, lead to repossession.

Some landlords are also said to be very close to entering financial deficits, which could again lead to repossession, with tenants non the wiser of imminent threats to their home.

Resources

Director of online flat and room share company SpareRoom.co.uk, Matt Hutchinson says that there are things that tenants can do to ensure a smooth tenancy agreement. He acknowledges the lack of resources in comparison to landlords conducting checks on them, but says that, “there is nothing to stop tenants doing a little research of their own.”[1]

Hutchinson suggests that tenants should, “start off by asking questions,” and that, “a good landlord will be happy to answer anything-within reason.” He goes on to say, “being thorough doesn’t have to mean being confrontational,” and that tenants should, “ask how long the previous tenants were in the property, why they left and whether it’s possible to speak to them.”[1]

Away from asking questions, tenants can use other options to make sure things are genuine. Tenants can ensure that prospective landlords do own the property they are interested in renting by using the Land Registry. For as little as £3, tenants can buy tile registers through the Land Registry which will show full ownership details. Data obtained from the Land Registry can additionally give details of charges on the property, such as loans, which are inclusive of mortgages. This data can help the tenant understand what payments must be upheld to avoid repossession.

Proof

Mortgage lenders’ terms and conditions state that a landlord needs one of a buy-to-let mortgage or consent to let from their mortgage provider in order to rent out a property that has a residential mortgage. Glenn Nickols, director of online-tenants community The Tenants Voice, says that tenants should not be afraid to ask for relevant documentation before signing any agreement. Nickols says, “Councils, housing associations and corporations always require proof from landlords that they have consent to let from their mortgage provider – so there is no reason why prospective private tenants shouldn’t ask for the same proof.” [1]

He goes on to say that, “a reputable landlord shouldn’t have a problem in supplying the tenant with a copy of such permission.”[1]

When a landlord has the mortgage lenders’ permission to let a property, tenants are in a strong position if the property has to be repossessed due mortgage arrears.

Rent to rent

There has been a rise in the number of rent to rent dealings in the past 12 months. However, while the process is legal, middle-men involved in some deals have let to tenants without their landlord’s permission. This had led to certain landlords not knowing who is residing in their property. In other cases, a middle-man has not passed tenants’ cash onto their landlord, leading some tenants facing eviction.

How renters can avoid major renting pitfalls

How renters can avoid major renting pitfalls

 

Tenants should remain vigilant when handing over rent money. They should ensure all due diligence is conducted before parting with any cash and should always ask to see any agreement between the landlord and acting agent or middle-man. In addition, tenants should ask for proof that their deposit has been properly protected.

Advertising sites

Rogue landlords are less likely to come under scrutiny by listing their property directly. Tenant’s therefore should remain vigilant when responding to any landlord advertising on listing sites.

Paul McCambridge, head of property at listing sight Gumtree, said that tenants should keep their wits about them when looking for rental property. McCambridge said, “if it seems too good to be true, it probably is. If the price of rent is unusually low, there might be a catch.”[1]

He goes on to urge tenants to, “check other similar properties in the same area to get a good idea of what you should expect to pay.” Additionally, McCambridge says, “It sounds obvious, but you should always visit a property before handing over any money to a landlord. People who are not willing to show you their property or meet with you before accepting you as their tenant might not be legitimate.”[1]

Transferring Money

Fraudsters are persistently trying to persuade their tenants to use services such as Western Union and Moneygram to transfer their deposit money. Both are legitimate businesses, but neither should be used when transferring deposits or rent money.

Peter Barnes, senior manager in global investigations at Western Union, said that there are three measures to follow that will avoid falling victim of fraud. Barnes outlines these measures saying, “never provide your banking information to people or businesses you don’t know; and never use a money transfer service to prove you have funds available for a deposit or any purchase.”[1]

[1] http://www.landlordexpert.co.uk/2014/02/17/from-the-tenants-point-of-view/

Home truths on landlord insurance

Published On: February 12, 2014 at 4:39 pm

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Welcome figures suggesting that Britain is well on the road to economic recovery have been boosted further with prospects for first-time buyers also looking brighter.

Help to Buy

Helped significantly by the introduction of the Help to Buy scheme, the number of first-time buyers rose by a huge 78% in 2013.

Paymentshield Insurance recently conducted a survey suggesting that despite the large increase in homeowners, many are underequipped in terms of insurance. The survey results indicate almost 33% of homeowners do not possess home insurance. More worrying statistics show that 34% confess to having no contents insurance, 81% are without mortgage payment protection and some 96% of homeowners have no income protection.[1]

Home truths on landlord insurance

Home truths on landlord insurance

Advice

The company believes that the rise in first-time property owners makes it a perfect opportunity for financial advisors to assist in the crowded market. By approaching the potential problems associated with first-time buyers head- on, there is a chance to cash in on the upcoming market gains.

Mortgage Payment Protection Insurance

An increase in the number of first-time buyers gives financial advisers the opportunity to flex their muscles with the provision of mortgage payment protection insurance. Lending figures for first-time buyers were up by 33% during the last 12 months.[1]

With discounts available on some policies for first-time buyers, such as introductory offers and deferred payments, there is the chance for buyers to temporarily take the edge off their expenses. Insurance brokers must communicate to the fresh-blood in the property market to give them the best value. Simply advising and explaining about products can go a long way in protecting first-time buyers and the industry.

[1] http://www.mortgagestrategy.co.uk/news-and-features/latest-news/home-truths-on-insurance/2006264.article

 

 

 

Are there Enough Homes for Britain?

Published On: February 10, 2014 at 10:51 am

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Britain’s nightmare with housing stems from the extremely high prices of buying your own home.

The average property costs five times the average person’s annual earnings; almost a record high. Prices are not slowing down either. December saw property prices sitting at around 10% higher than they were the previous year.

Rents are also increasing sharply, with housing costing about 20% of a typical family’s weekly expenses, up from 16% in 2000.1

The Government is also struggling with the expenses of housing the population, as many simply cannot afford the rising rents, and 1.7 million people are waiting for state-funded housing.1

Young people are suffering the most, as they are unable to get onto the property ladder. Many are still living with their parents, as they attempt to save for the huge deposits expected by the banks.

The proportion of Britons who own their own home has dropped from 70% to 65% since 2000.1 However, many stress that they are still eager to buy.

There are many people, and situations blamed for the housing crisis. Although it seems that several factors are contributing to the problems, and the lack of solutions.

The existing population have to compete with foreigners buying into the market. The surge in immigration has lead to a densely populated country, and simply too much demand for new homes.

Are there Enough Homes for Britain?

Are there Enough Homes for Britain?

However, this problem seems centred within London, where wealthy foreigners are driving up house prices in the capital. There is not much proof that the same is happening around the country.

The higher house prices of the last few decades have prompted some to invest in the sector. Buy-to-let landlords are now purchasing property after property, and due to their approval from the banks, they are forcing many young people out of the market.

Nonetheless, buy-to-let landlords could be seen to increase the supply of houses, as often they will buy bigger homes to divide into smaller apartments.

Rural lobby groups, such as the Campaign to Protect Rural England (CPRE), and the National Trust are preventing any building on the green belt. Just 13% of the UK’s land is built on1, meaning that the overcrowded urban areas are simply having to increase prices.

Unfortunately, these groups are effectual, and manage to stop politicians building in rural parts.

Construction firms do not build enough property, and this raises their profits due to the new homes that they sell being increasingly expensive. In an ideal world, new companies would be competing with them to stabilise these profits. However, this does not seem to be happening, leading to unaffordable property.

During the 2008 recession, banks abruptly stopped providing mortgages to young people, and are only just picking up. They began requiring huge deposits and introduced high interest rates to new borrowers. This generation have therefore suffered rejection from the market.

The sudden halt in lending pushed young people off the property ladder. Although, banks were right to be conscious of providing mortgages to those who overspend and could struggle to repay their loan if interest rates rose further.

The Government’s Help to Buy scheme provided a short-term solution to a larger problem. The system has pushed keen young buyers into the market, although it has also stopped the levelling out of property prices that the sector needs.

Tenants in Britain are also suffering from insufficient rights, compared to those renting in the rest of Europe. Contracts in the UK are predominantly short-term, allowing landlords to control the sector. Excessive fees for letting agents can also halt renters from saving.

In Europe, long-term renting is much more commonplace, and this is potentially due to tenants having greater rights. British renters could benefit from having more equal rights to landlords and thus wanting to stay in the sector.

Landlords are overcharging those that simply have to rent. A rent cap by the Government could stop investors taking advantage of the generation that cannot get onto the property ladder. However, limits can prevent landlords from developing more properties, providing less supply

By protecting tenants, Britain would move into a renting-friendly society. This could help mortgage providers stabilise their lending.

The Government’s mortgage plans would indeed increase the demand for property, but would not boost supply. In the future, first time buyers will face even greater mortgages, of which their wages will not match.

The rate of new build construction is about 150,000 per year, the lowest number since the 1920s. However, annual demand for these properties is around 250,000.1

There are many options for building more homes, for example, bigger development budgets, or land value tax, which would raise supply and reduce prices in the market.

1 http://www.independent.co.uk/property/house-and-home/property/britain-is-suffering-from-a-housing-crisis–who-is-to-blame-and-how-can-we-fix-it-9113329.html