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Em

Em Morley

Wrongdoings of Estate Agents Uncovered

Published On: October 30, 2013 at 11:38 am

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Channel 4 showed a programme last week that exposed the wrongdoings of estate agents.

The agents, filmed with undercover reporters posing as buyers, tried to make them use in-house services, for example, mortgage brokers.

The show highlighted how anyone can become an estate agent, without certain qualifications or experience. Although the lies told to prospective buyers was what the programme centred on.

Wrongdoings of Estate Agents Uncovered

Wrongdoings of Estate Agents Uncovered

Emails from agents to buyers were shown, telling the customers to use the agent’s in-house services for the best chances of acquiring a home.

Buyers do not have to use these services, says Peter Bolton King from the Royal Institute of Chartered Surveyors (RICS).

The reports played the role of potential buyers, discovering whether they would be forced to use in-house services.

One poser went to Barnard Marcus estate agent, where they explained to her that if she were to use the company’s in-house mortgage broker, then she would be told about available properties sooner.

The show explained that this is called priority viewings.

The same reporter visited estate agent Felicity J Lord, to view a home in East London. They told her that if she used the in-house mortgage broker, any offer she made would be prioritised to the seller. This tactic is called prioritised offers.

Both of these ploys are prohibited.

Another reporter also went to Felicity J Lord, and told staff that had already had a mortgage offer in place. Nevertheless, they attempted to encourage him to use their in-house mortgage broker, saying that they would only take the property off the market if he did so.

Both estate agents told the programme that these services are optional.

The show also saw estate agent Abbott’s recommending a buyer to take out a buy-to-let mortgage, but live in the property. This practise is mortgage fraud, and would land the borrower in serious difficulty if the lender discovered the trick.

Tenants are Unaware that Letting Agents aren’t Regulated

Published On: October 29, 2013 at 2:16 pm

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At the start of this month, Eric Pickles, minister for Communities and Local Government, launched a number of reforms intended to protect tenants renting a property.

Mr Pickles believes that the reforms will encourage longer, fixed-term stability for families, alongside raising standards within the private rental sector. In addition, Mr Pickles proposed the introduction of a tenants’ charter, which will ensure tenants know exactly what to expect from their agreement and where to go for help.

More depth

Reacting to Pickles’ announcement, Paul Weller, Managing Director of letting agency Leaders, said that despite the reforms being welcome, they needed to go further.

Tenants are Unaware that Letting Agents aren't Regulated

Tenants are Unaware that Letting Agents aren’t Regulated

 

Leaders recently conducted a survey of over 5,000 tenants, of which 63% said that they did not know that letting agents were not subject to any type of regulation. Mr Weller said: “As it stands, it is up to tenants and landlords to protect themselves, but many are not even aware of the need to do so. The advice, in the absence of regulation, has been to only deal with agents who are members of a self-regulating professional body such as ARLA, RICS or NAEA, who operate to a strict code of conduct. Yet our survey found that just 42% of tenants considered membership of a professional body to be very important when choosing a letting agent. By comparison, 70% said that choice of available properties was very important to them in choosing their letting agent.”[1]

Numbers

Demand for rental accommodation is vastly outnumbering supply across much of the UK. With this in mind, Weller believes that a growing number of tenants are quickly renting properties that are suitable for them, without questioning who the agent is or if they are affiliated with a professional organisation. He indicates that this provides a threat, stating: “40% of letting agents are not members of a professional body, so it is clear that the public remains at risk.”[1]

Weller goes on to expressively ask: “How many more tenants and landlords must be let down before the Government will regulate an industry that has been crying out for such measures for decades?” [1]

He believes: “You can have as many worthwhile laws, regulations, schemes and charters as you like, but if there is no regulation of the people who are supposed to abide by them, then only the good agents will do so, while the unscrupulous will continue to flout the law whenever they please.”[1]

Solution

When asked for a solution to the problem, Weller offered a simple answer. He believes that all agents should be licensed in order to work and if they are not, it should be illegal for them to let.

Weller says: “We already have many sensible laws governing letting but, under the current system, anyone can set up as a letting agent with no qualifications, experience or knowledge of the legalities of letting. It is like stipulating laws for motorists in the interests of road safety and then allowing people to drive without having to prove they are capable or know the rules of the road.”[1]

[1] http://www.landlordtoday.co.uk/news_features/63-of-tenants-are-unaware-that-letting-agents-aren%E2%80%99t-regulated

 

 

 

Immigration Act Could Jeopardise Landlord Safety

Published On: October 29, 2013 at 11:26 am

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Fears are building that the new Immigration Act could put landlords in physical danger. Under the new proposals, landlords will have to check the immigration status of all potential tenants, who will have to prove their right to stay within the United Kingdom.

Harassment

However, the National Landlords Association (NLA) has warned that some tenants could become aggressive when asked to prove their eligibility. In addition, they claim that some landlords could be accused of harassment.

The Government responded by pointing out that a number of voluntary checks from certain landlords had uncovered a number of illegal immigrants and said that the new checks would be “straightforward.” In addition, ministers argue that property owners have “nothing to fear” by carrying out the checks.[1]

Fines

Under the new proposals, landlords found to be renting to tenants that are not permitted to live in the UK will be subjected to fines of up to £3,000. The Home Office has promised to assist all landlords by providing answers on suspected illegal tenants within 48 hours of receiving the relevant documentation.

However, Richard Jones from the Residential Landlords Association (RLA) believes that these plans are “unworkable,” and that “very little” resources were being given to landlords in order to outline their exact requirements to fully cooperate with the bill.[1]

Immigration Act Could Jeopardise Landlord Safety

immigration Act Could Jeopardise Landlord Safety

 

 

Jones points out that the Border Agency, with an estimated budget of £2 billion, has not been able to fully clamp down on illegal immigrants. As a result, Jones asks: “How can we expect a whole host of small landlords to do anything better than the Border Agency have been able to achieve?”[1]

Dangerous

Carolyn Uphill, Chair of the NLA, is gravely concerned about the potential impact of the Immigration Act on landlords. Uphill believes that due to the lack of resources at their disposal, landlords could face “dangerous and unintended consequences” when having to maintain checks on tenants.[1]

Uphill suggests that a number of tenants could disappear from their property. Additionally, landlords could be barred from entering their own house, which Uphill believes could lead to serious physical dangers.

“Landlords simply cannot walk in the property and require the tenant to speak to them,” Uphill said. “If a landlord just turns up unannounced that can be harassment and a criminal offence.”[1]

She continued by suggesting that tenants could act aggressively when confronted, as they may be scared of going back to conflict areas. She said: “In the worse scenario, the tenant feeling themselves possibly under threat, because they might be sent out of the country and perhaps back to a war zone they are very frightened off, could potentially become aggressive with the landlord.

“You only need one incident where the landlord and tenant get in some sort of physical situation for that publicity to put all landlords off even considering taking on anyone on a temporary visa.

“Then you have all those people as vulnerable tenants forced into the underclass of rogue operators who will not care who take and certainly will not inform the immigration authorities.”[1]

Unnecessary

Further criticism of the changes has come from Universities UK, who already assess foreign students and claim that the duplication of this work from landlords is unnecessary.

However, the Association of Residential Letting Agents (ARLA) has welcomed the proposals outlined in the bill. Shadow Policing Minister David Hanson agrees that there is a “shared objective” within the Commons to clampdown on illegal migrants and that landlords should be expected to take some responsibility. He did however, go on to say that the bill should be changed to become “more palatable.”[1]

Immigration minister Mark Harper believes that a more hardened approach is necessary to root out illegal immigrants. He said: “There is no doubt that immigrants have helped make Britain a richer and stronger society, but we must take firm action to address illegal immigration.

“We will be requiring all landlords to ensure that prospective tenants are here legally. This is in line with existing best practice across the rental sector.”[1]

Harper went on to say: “We do not want to disadvantage legitimate landlords and tenants,” and therefore have “devised a system which will be effective and light-touch.” This, he states, will make it “tougher for illegal immigrants to rent property, but giving us the powers to take robust actions against rogue landlords.”[1]

[1] http://www.bbc.co.uk/news/uk-politics-24726055

 

 

 

Property Market Drops as Christmas Nears

Published On: October 25, 2013 at 3:22 pm

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The amount of people looking to buy in the property market generally decreases in November, as people turn their attention to planning for Christmas.

As a result, buy-to-let investors can often find good deals at this time, as sellers are desperate and there is little competition.

However, a second Help to Buy scheme may have the same impact as the first, on the property market. This could mean higher than ordinary demand in the coming months, and could make it difficult to close deals at a low price.

Property Market Drops as Christmas Nears

Property Market Drops as Christmas Nears

The second scheme will be different from the previous system, however. The first scheme related only to new build houses with purchase prices under £600,000.

For buyers, this would mean that, considering they have a 5% deposit, the Government would pay up to 20% of the property’s value to the developer, making a 75% loan-to-value mortgage a necessity.

This lower-level lending was made possible by Help to Buy, alongside cheap loan rates from the Funding for Lending Scheme.

The new scheme aims to help lenders offer 95% loan-to-value mortgages. This will aid the purchase of second-hand homes of under £600,000 value.

The lender will be required to pay the Government a fee as protection against the buyer not paying the mortgage. In this case, they will be able to claim back up to 15% of the loan from the Government.

Despite the scheme being well publicised, this second instalment may not be as effective as the first, unless lenders reduce their interest rates.

With current rates on 95% mortgages around 5.5%, those under the new scheme will be just 0.5% lower. This means that the buyers who already have a 5% deposit can afford the existing rates and will possibly already be on the property ladder.

From a buy-to-let viewpoint, the new scheme looks likely to have little impact on the market.

For well-off landlords, there are expected to still be many opportunities for new investments in the next few months.

Thousands Become First Time Landlords

Published On: October 23, 2013 at 3:26 pm

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Thousands of people in the UK are becoming first time landlords this year.

Emma Fildes, 34, is an estate agent for Fyre Mcdade. She lives in east London and has purchased a one-bedroom flat in Clerkenwell. Within two weeks of closing the deal, two students had moved in, paying £420 a week.

She says: “Having a buy-to-let property is something I’ve wanted to do for years but have always been a bit scared. I met a mortgage broker who went through the figures and he showed me it was absolutely feasible, so when this opportunity came up in Clerkenwell, I went for it.”

Fildes chose this particular location as property prices are set to boom there, an estimated 40% increase in the next five years, say Knight Frank. This is due to the Crossrail development.

By remortgaging her home, Fildes was able to produce a 20% deposit, and decided on a new build flat for letting out.

“In terms of finance, I worked on the basis of the worst-case scenario. When I realised I could cover my costs even if I got £30 less rent a week, which was far lower than expected, I felt it was too good an opportunity to miss.”

Thousands Become First Time Landlords

Thousands Become First Time Landlords

Rumeet and Richard Simmonds’ incentive to become buy-to-let landlords was the financial security it could provide for the future, particularly in retirement. “Working in finance, I felt investing in bricks and mortar was the best option,” says Rumeet.

The couple, who live in Kent, have bought a £385,000 two-bedroom flat in the Greenwich Square development. Rents in this area have risen by 11% this year, as a consequence of the new builds. The traditional family location has been attracting a younger market.

Rumeet explains: “We felt this development will have a strong sense of community, with a gym, swimming pool, medical centre and library. The other big selling points were the size of the apartments and the predicted rental returns.”1

About 29,000 investors became buy-to-let landlords for the first time last year, says the Association of Residential Letting Agents (ARLA). This is a huge 80% ride from two years ago. It is believed that stagnant salaries, high living costs, and caution over other types of investment have drawn these landlords to the market. Buy-to-let offers low mortgage rates and high rents.

Choosing the right first investment property is key. Knowledge of the local market is vital for understanding who the tenants will be, and what property they’re looking for. If rental returns are your objective, then you may not receive long-term capital gains, or vice versa.

Emma comments: “I see a lot of people expecting amazing returns in London, but unless you’re brave and buy off-plan very early in the development, which overseas investors seem more willing to do than British buyers, you’re not going to get the 5% that was standard 12 months ago. You have to see it as a long-term investment.”1

Like Emma, buying a one-bedroom property can be the perfect investment. Initially, they are cheaper to buy, and are in demand from the young renting generation who cannot buy their own homes.

Director of Finders Keepers, a letting agency in Oxford, Frank Webster, agrees: “There is often a premium on the rent, too, as developers don’t build many one-bed flats or studios, and they often cost less than the lowest stamp duty threshold.

Family homes are also a great option, says Elliot Lester, sales manager at Aston Mead in Surrey and Berkshire.

“Don’t immediately just opt for what most investors choose; small flats close to good rail services for the city. There are many types of tenants and those that don’t need the railway will look in a much wider area.

“This is where landlords can see a good return on their investment. If you can afford to buy a small family house, you could see tenants staying much longer. That will reduce general wear and tear and save you paying fees for every new tenancy.”

A better net income can also be earned from freehold houses, as opposed to leasehold flats. Lester explains: “Many first-time landlords don’t take into account the cost of ownership, including service charges and maintenance fees, which can drain off four to six weeks’ rental income a year.”1

After taking the leap and becoming an investor, first-time landlords reap the rewards of a growing market.

1 http://www.telegraph.co.uk/property/property-club/10405292/first-time-landlord.html

 

 

Landlords and Their Tenants Happier than Ever

Published On: October 9, 2013 at 2:57 pm

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Categories: Landlord News

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A solicitors firm has suggested that the number of positive relationships between tenants and landlords are at a record level.

Landlords and Their Tenants Happier than Ever

Landlords and Their Tenants Happier than Ever

Butcher and Barlow suggest that the good practice guide for business leases that was introduced a few years ago has given more flexibility to the commercial letting industry. This in turn has cut the number of disputes between landlords and tenants.

Commercial Lease Code

The good practice guide is better known as the Commercial Lease Code. This was devised in order to give more clarity in agreeing the terms and conditions of a lease.

Property partner at Butcher and Barlow, John Hyatt, suggests that relations between tenants and landlords are extremely high following the introduction of the Commercial Lease Code. Hyatt said: “The Commercial Lease Code aims to put tenants on an equal footing with landlords when negotiating lease terms. The Code advises that landlords include a number of clauses in the contract covering everything from service charges to repairs and insurance.”[1]

Hyatt believes: “Commercial leases are extremely complex, which is why they often lead to disputes.”

He said, therefore: “Anything that helps to make the process more transparent is good news.”

As a result, Hyatt says that the Code, which “recognises a need to increase awareness of property issues,” is very valuable.

Mr Hyatt also believes that the Code is having the desired effect, saying: “It seems to be working as we are seeing fewer legal disputes between tenants and landlords,” meaning the relationship is “more harmonious than ever.”[1]

The Commercial Lease Code is a joint publication devised by 12 trade bodies. These include the British Property Foundation, the Royal Institute of Chartered Surveyors and the Confederation of British Industry.

[1] http://www.butcher-barlow.co.uk/news/tenants-and-landlords-happier-than-ever.aspx