Mydeposits chief executive hits back at ‘broken system’ Which? report

which-logo-300x192The chief executive of mydeposits has hit back at a new Which? report published this week calling for reform of the deposit system for tenants in the private rented sector.

Eddie Hooker highlighted that since their introduction 12 years ago, Tenancy Deposit Protection schemes have consistently delivered a good service for the majority of tenants.

“I recognise that the systems and processes of deposit protection may need updating to deal with today’s rental market [but] having carried out extensive research I do not believe that overhauling the current system in favour of, for example, no deposit insurance alternatives, offers any greater protection for tenants”

Hooker concedes that there is an affordability issue for tenants in the market, with the average deposit in London now reaching £2500, this is a situation that must be addressed.

However, Hooker believes that some proposed alternatives could have negative consequences for tenants, adding that ultimately tenants are still liable for recompense to an insurance company which many simply do not realise.

“However, purchasing an insurance policy which reimburses a landlord if the tenant cannot or will not pay any losses, simply buys the tenant out of having to pay a deposit and could place tenants is a worse situation some years down the line” he says.

“The fees and/or premiums charged over a 10 year renting period, could end up costing the tenant £6,000 to £7,000 for nothing. What many don’t understand is that deposits are refundable if the tenant abides by the terms of the tenancy agreement. Insurance premiums are not” adds Hooker.

Hooker argues that any proposed change to the current TDP system should recognise the existing benefits, such as Alternative Dispute Resolution, but be enhanced for a modern rental market.

“Options such as deposit loans, custodial only schemes or deposit passporting could address affordability issues and offer tenants greater control, while continuing to give landlords the confidence to remain in the buy to let market.”

Read the full Which? report here

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Rents to rise 15% as landlords squeezed by more regulation says RICS report

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Rents are expected to increase 15% over the next five years due to increasing demand and limited supply following the Governments section 24 tax assault on buy to let investors. 

A Royal Institution of Chartered Surveyors (RICS) market snapshot shows nearly a quarter of respondents reporting a fall in new landlord instructions in the last three months.

This is the eighth consecutive quarter the number of rental properties has fallen.

The shortage of supply means rents are projected to increase by almost 2.0% nationally over the next 12 month, reaching a 15% increase by 2023.

The institution says the surge reflects the changes in the rental sector after small-scale landlords quit thanks to section 24 and an ever increasing regulatory burden.

East Anglia and the South West are expected to see the sharpest growth over the period.

RICS chief economist Simon Rubinsohn says: “The impact of recent and ongoing tax changes is clearly having a material impact on the Buy to Let sector as intended.

“The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing.

“At the present time, there is little evidence that either is likely to make up the shortfall. This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”

And Abdul Choudhury, RICS’ policy manager, adds: “Our survey suggests that recent government policy and legislation changes have impeded the growth of the private rented sector, which is a vital part of a functioning homes market.

“Withdrawing tax breaks that small landlords relied on, placing an extra three per cent on second home stamp duty, and failing to stimulate the corporate build to rent market, has understandably impacted supply.”

“The government must urgently look again at the private rental sector as a whole, including ways to encourage good landlords.”

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Study finds evicting rogue tenants takes 17 weeks

clocks-1427746It’s not unusual to see the press churning out stories covering landlords who break the law and exploit vulnerable tenants. However, the same enthusiasm is often missing when it comes to landlords who are forced to deal with rogue tenants and the considerable costs they inflict.

Most often, landlords have no alternative but to claim for possession of their property because the tenant has failed to pay rent, damaged the property or broken the terms of the tenancy contract. Unfortunately, the process of serving a section 8 or 21 to regain vacant possession can often prove to be time consuming and expensive.

It takes an average of 118 days for court-appointed bailiffs to remove tenants from private landlords’ properties after bringing a claim to court, according to new research by the Simple Landlords Insurance.

Their new figures reveal it took an average of 16.9 weeks from claim to bailiff eviction during the first three months of 2018.

A total of 21,429 possession claims were brought to court last year, of which 6,260 ended in eviction by bailiff.

Speaking on the new findings, Tom Cooper, director of underwriting at Simple Landlords Insurance, commented:

“The good news for everyone is that in 2017 only 0.5% of landlords made a possession claim in court. And only a third of those had to go through to the bitter bailiff end. The bad news is that if it does happen to you, it can cost a lot of money – and not just the average £1,700- £2,000 in legal fees.

“We wanted to get a more realistic idea of the impact of the process in terms of lost income, inconvenience, and ongoing legal fees in the worst and longest case scenarios.

“Just looking at lost rent, there are few landlords who can afford to lose up to 6 months’ worth – the time it takes for a tenant to go into arrears, for them to issue a Section 21 notice, and then for them wait 17 weeks to see the court process through.”

Often the best way for a landlord to protect themselves, their property and indeed their tenant is to take out appropriate landlords’ insurance, which differs from standard home insurance.

Getting the right tenant is crucial for landlords and agents, with NLA Tenant Check, you can perform extensive background checks on tenants to ensure you find the best matches for your properties. You can also cover unpaid rental income of up to £2,500 per month and cover legal expenses claims of up to £100,000, ensuring you and your portfolio are protected.

For best protection, you can also take out NLA Landlord Property Insurance. Developed specifically for landlords, the service takes into account your landlord building insurance requirements gives you highly competitive premiums and cover lock replacements up to £1,000.

 

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Five-year electrical checks to be compulsory for the private rented sector

Architect man holding pencil working with laptop and blueprints for architectural plan, engineer sketching a construction project concept.

Last week, the Government announced a number of measures around building safety in England, including the launch of a consultation on building regulations and fire safety guidance.

However, the Government is yet to publish further details concerning the announced requirement for electrical installation safety checks every five years for properties in the private rented sector. The NLA will be pressing the department for more information concerning:

  •  the full scope of the inspections required
  •  the regulatory and enforcement regime
  •  who will be deemed competent, or authorised to carry out the checks
  •  any exemptions which may be created, for instance in respect of new buildings
  •  when the testing requirement is likely to come into force, and whether the Government is confident there will be sufficient qualified electricians to carry out the volume of inspections required.

The NLA will also seek confirmation that portable appliances are not to be included in the checking regime, arguing that this could introduce unreasonable practical costs and burdens for private landlords, relative to the risk posed by landlord-supplied appliances.

The Secretary of State for Communities, Rt Hon James Brokenshire MP, said there will be a full-scale technical review of the guidelines covering fire safety matters within and around buildings, known as ‘Approved Document B’, this autumn.

The Government are seeking views on the proposed clarification of statutory guidance on fire safety that aims to improve usability and reduce the risk of misinterpretation by those carrying out and inspecting building work. The key aim is to update the existing guidance to reflect modern building practices and technical and scientific innovations, including the latest understanding of fire risks.

In addition to the new electrical checks the Minister announced:

  • a residents panel will be established to ensure proposed safety improvements are grounded in the experience of those who live in high-rise buildings
  • Dame Judith Hackitt will chair an Industry Safety Steering Group to drive the culture change needed to improve safety and hold industry to account
  • working with a small group of organisations from industry, safety improvements will be piloted, in line with Dame Judith Hackitt’s recommendations, demonstrating early leadership on building safety reform.

Speaking at the launch of the consultation, he commented: “There is nothing more important than ensuring people are safe in their own homes.

“That is why I am announcing a package of measures focused on improving building safety, having listened carefully to the concerns which have been raised.

“Dame Judith’s report sets out the right framework to improve safety, but I will not hesitate to go further than the recommendations where I deem it necessary.

“That is why I am going further than my original commitment to simply clarify the guidelines, by commencing an end-to-end technical review of the fire safety aspects of building regulations in the autumn.”

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An average eviction now takes 118 days

35957363-close-up-of-wooden-gavel-isolated-on-white-backgroundAnalysis by the Simple Landlords Insurance Company has found that it takes an average of 118 days for court appointed bailiffs to remove tenants from private homes after a claim is brought to court.

According to researchers, this is the first time the length of the eviction process has been made public.

The study found that landlords in London are the most likely to have to evict, while those in the South West, North East and West Midlands were the least likely to do so.

Key Findings

  • During 2017, private landlords brought 21,439 possession claims to courts in England and Wales;
  • 27 per cent of claims didn’t receive a court order. Many claims are rejected for failing to follow the correct eviction proceedings;
  • The average insurance payment made for eviction support is £4,341.22, which includes legal expenses and lost rent;
  • Landlords in London are more likely to have to evict a tenant.
  • Buy-to-let investors in the capital brought 195.3 claims per 100,000 households last year;

Speaking on the study and its results, SLI Director of Underwriting Tom Cooper, said:

“In 2017 only 0.5 per cent of landlords made a possession claim in court and only a third of those had to go through to the bitter bailiff end. The bad news is that if it does happen to you, it can cost a lot of money – and not just the average £1,700- £2,000 in legal fees” cautions Tom Cooper, director of underwriting at Simple Landlords Insurance.

“Just looking at lost rent, there are few landlords who can afford to lose up to 6 months’ worth –  the time it takes for a tenant to go into arrears, for them to issue a Section 21 notice, and then for them wait 17 weeks to see the court process through.”

 

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Red tape milestone: There are now over 125 pieces of legislation affecting the private rented sector

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There are now over 125 pieces of legislation and regulations governing the private rental sector, according to research undertaken by Letting Agent Today.

According to the publisher “the total of over 125 tells only part of the story, for LAT’s research suggests that over 80 of those laws and statutory regulations have been introduced since 1990 – an indication of how governments of both major parties have been squeezing the sector with additional bureaucracy”.

The large body of individual laws and regulations introduced lend weight to the argument that it is time for someone (perhaps our new housing minister?) to consider alleviating bureaucratic burden of agents and landlords.

The research from letting agent today found some interesting stats regarding the pace of change in the law in recent years:

· Since the Conservative-led coalition government came to office in 2010, over 20 laws or regulations have come into effect; in the single decade of the 1990s, during the Thatcher era and the early Blair years, there were over 30 measures.

· Many of the oldest examples of laws, although technically still operational, are unlikely to be invoked today; the longest-standing of them all is around 290 years old.

· As the remaining 55 or more measures date back almost 300 years, this gives a clear snapshot of how legislation and regulation of the private rental sector has rapidly accelerated in the modern era.

Author Graham Norwood argues:

“While almost any activity that has existed for hundreds of years will inevitably have a substantial body of law applying to it (and renting property has certainly been around for centuries in the UK) the sheer number of pieces of legislation still on the statute books and applying to agents and/or landlords adds weight to the argument put forward by some bodies that the lettings sector has far too much red tape”.

You can find the full list of legislation affecting the private rented sector here

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Longer term tenancies: financial incentives &lower letting fees?

Typical Victorian style terraced townhouses in Chelsea London

The Government has said it is open to tax or cash incentives to encourage landlords to move towards longer term three-year tenancies.

A consultation released on the 2nd July by the Ministry of Housing, Communities and Local Government unveiled plans to move from a two-year model tenancy agreement to one that lasts for three years.

The key proposals outlined in the consultation are:

·         Landlords would have to offer a minimum three-year tenancy but with a break clause of six months if either party is dissatisfied. If both landlord and tenant are happy, the tenancy would continue following the break clause.

·         After the break clause, the tenant would be able to leave the tenancy by providing a minimum of two months’ notice in writing.

·         After six months, the landlord can only repossess their property during the fixed term if they intend to sell the property or by serving a Section 8 eviction notice. They would still be able to serve a Section 21 notice at the end of the tenancy term.

Financial Incentives

Possible tax incentives for landlords are also being considered, the consultation said:

“Financial incentives could be explored. This could be quicker to implement but would still require legislation and could be administratively burdensome.

“The landlord would likely need to demonstrate compliance with other legislative requirements such as completing annual gas safety checks and protecting any deposit taken in a Government approved tenancy deposit protection scheme, and this would need to be easily verifiable. We would also have to consider ways to ensure that incentives were not subject to abuse.”

“Cash payments could be considered for landlords who demonstrated that they had offered and delivered a longer tenancy. Such payments could be administered locally by local authorities.”

Lower Fees?

The consultation also suggests longer term tenancies could cut down lettings fees charged to tenants:

“Letting agents charge fees for tenancy renewals. The repeated churn in tenancies prompts business for an agent, and the opportunity to charge fees. This arguably creates an incentive for agents to advise landlords and tenants to agree a short-term contract, representing another barrier to longer term tenancies.”

NLA Reaction

Reacting to the announcement of plans to introduce mandatory three year tenancies, NLA Chief Executive Officer Richard Lambert said:

“In his speech to the Conservative Party conference last October, Sajid Javid announced plans for a consultation on how to encourage longer tenancies. That’s been the tone of the discussion ever since – consultation and encouragement. Frankly, right now, I feel we’ve been misled.

“This is supposed to be about meeting the needs of the consumer. NLA research with tenants finds consistently that around 40% of tenants want longer tenancies, but 40% do not. More than 50% consistently say that they are happy with the tenancy length they were offered, and 20% tell us that when they asked for a longer tenancy, they got it.

“We would accept that the flexibility of the current Assured Shorthold Tenancy isn’t used as effectively as it could be, and that we should be looking to find ways to ensure that tenants are offered the kind of tenancies they need at the time they need them. That means thinking about how to modernise a model devised 30 years ago, to take account of the changes in the people who are renting and the way they live their lives. How will that be achieved by moving to a more rigid system, more reminiscent of the regulated model the current system replaced?

“This is a policy which the Conservatives derided when it was put forward by their opponents in the past two General Election campaigns. It’s hard not to see this as more of a political move aimed at the renter vote than a genuine effort to improve how the rented market works for all those involved.”

The consultation on three-year tenancies will last for eight weeks and close on August 26.

Read the full consultation here

 

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