Worries that rent arrears will increase with job losses

It has been predicted that more and more tenants will now default on their rent following the news that unemployment has reached a 12-year high as 2.26 million are now unemployed.

The Office for National Statistics released these figures on Monday, showing that the number unemployed has grown by over 200,000 in just three months. The Managing Director or HomeLet responded by stating that we should expect a proportional rise of the number of landlords not seeing rent for their tenants.

The figures from the Office for National Statistics also showed that the number of people currently in work has seen its biggest slump in one quarter since records began in 1971.

One of the worst areas to be hit is youth unemployment for those aged 18-24. This has increased by 74,000 to those out of work now at 695,000.

HomeLet provides tenant referencing services in the UK, and the majority of its 30,000 applicants each month are aged in this 18-24 bracket.

The figures for youth unemployment are at the worst they’ve been for 15 years, and this is expected to get worse over the next few month as a whole new batch of school leavers will be attempting to find work.

It is expected that this figure could impact the private rented sector in areas that rely heavily on young people finding jobs and taking rented accommodation as opposed to staying in their family home.

This rising unemployment in young people could delay the recovery. Even those who manage to find jobs are facing an uncertain time ahead.

In the case of landlords, many rely on monthly rent to pay the mortgage – so missed payments could be a huge problem. HomeLet director urges landlords to take out landlord insurance to protect themselves in these circumstances.

Ex-tenant becomes squatter at £300,000 house

A former tenant is accused of becoming a squatter in a Midland home. The owner, an elderly woman, is looking to sell the home in order to pay for health bills.

Rent has not been paid on the home since Christmas, but the tenant refuses to leave despite legal action.

83-year-old owner Phyllis Howarth’s home care is costing £3,000 a month, causing the need to sell the property. Her son states that the landlord is refusing to move even though his agreement ended in March. Further civil action now has to be sought as a way to evict this tenant.

According to Phyllis’ son, Mr Miller, the tenant has refused to answer the door and the phone, and has been squatting in the home since his agreement ended. The house cannot be sold while the ex-tenant is still living there.

Mr Miller claims to have taken out a loan in order to cover costs for his mother’s home care.

Miller also claims he was nearly arrested when he tried to enter the home to get his mother’s possessions, when the occupant called the police.

Despite being served two notices, the tenant refuses to leave. He has also altered aspects of the home without permission whilst living in the property free of charge. Phyllis continues to pay council tax on the property.

Mr Miller claimed that the tenant, Mr Bakewell, is receiving incapacity benefit.

The squatter owes 28 weeks’ worth of rent, refusing to leave even after a second notice which ordered him to leave during May.

Things Looking Good for Landlords

Things are looking good for property investors after signs that the housing price falls are now easing off in many areas. Rents, that were seeing sharp decreases, are also getting more stable.

Agents are now seeing an increase in investors who are looking to buy a second home or add to their portfolio of property. Even those who only expect modest returns are attracted to buy-to-let property as a way of boosting their income.

In the second quarter of the year, the gross return on houses has increased since the last quarter from 4.8% to 5.1%. This is according to the Association of Residential Letting Agents, where the yield for flats has risen to 5% from 4.9%.

Housing analyst, Hometrack, predicts that gross yields could make it to 7% next year as cheaper properties are likely to continue losing value.

However, potential landlords should still think about many of the costs involved in renting out their property – which can take a large portion of their income. This may include income tax, maintenance, agents fees and more.

Smartlandlord estimates that these costs can take around 1-1.5% of all rent profits, even within using a letting agent. This is coupled with the fact that many landlords have been forced to lower their rent in recent months.

There are now signs that the market is improving, and letting agents claim fewer tenants to be demanding lower rent. Certain properties, including one and two bedroom flats in London, seem to be improving more quickly than others.

Buy To Let Risk With Cannabis Farms

Buy to let landlords have recently faced a number of issued, from lower rents, to property prices shrinking, and a number of new rules and regulations. There is now a new problem, where buy to let properties have been used to cultivate cannabis.

Police are warning that this problem is becoming more serious.

This cultivation can leave homes ruined in a space of days after cannabis farmers have moved in lighting and other equipment. This can leave wiring in a dangerous condition, walls knocked down, and debris from the farming itself.

There is also impact on communities, where cannabis cultivation has been linked to a range of organised crime.

According to the definition by the Association of Chief Police Officers, a cannabis farm means there are 100 or more plants. For 2007-2008, police raided over 3,000 farms across the country, most of which were buy-to-let homes.

Police warn that cannabis farmers are more likely to pay 12 months of rent upfront as they know they are less likely to have properties inspected. They may also choose locations with fewer passersby.

One landlord discovered her buy-to-let property had been used as a cannabis factory, and she has since spent over £10,000 putting things right. The landlord blames herself for not checking up on the tenants.

There are a number of measures that landlords can take to protect against cannabis farmers, including being wary of tenants who pay cash up front and checking all references. It is important to check on the property regularly, or pay neighbours to do so if this is not possible. If the windows are permanently covered this may also be a sign of a cannabis factory.

Government Incentives Needed According to Landlords

The Association of Residential Lettings Agents (ARLA) has recently claimed that a new government incentive is in order to help landlords modernise homes.

Operations Manager, Ian Potter, stated that most private rental sector landlords are individuals or couples who can find upgrades and improvements daunting.

The number of properties available for rent grew by 17% in the last year, and thousands of home are now in need of modernisation.

The government has also recently recognised the important role that the private rented sector will have in the future of its housing strategy.

However, there was no recommendation given as to how this will be done. A survey of landlords stated that if they were to receive a form of tax relief, two thirds would choose to upgrade the properties.

The ARLA proposed in an earlier budget submission that attention should be given to incentives in the form of tax relief for landlords, and another scheme could also help in landlords struggling to meet the new efficiency targets.

The scheme is aimed at stimulating improvements in order to avoid tenants leaving in sub-standard houses. However, there has not yet been any signs of how this could be done, or where the government will find the money.

The survey carried out by the ARLA showed that a third of properties at the time of buying were in poor condition and in need of refurbishment.

New Scheme to Regulate Landlords and Deposits

Lost deposits are set to be avoided completely if new plans are put in place to overhaul the private rental sector.

The new scheme would see that an independent third party hold all deposits. If any disputes should arise they will make the decisions. The Social Development Minister, Margaret Ritchie, stated that the rented sector could be utilised as a way of meeting housing needs.

One of the central ideas up for consideration aims at putting tenants’ deposits into a central scheme so that landlords are not able to simply refuse to pay them back without reason. There will also be a Government guarantee for those who cannot afford a deposit.

This move was welcomed by the Citizens Advice Bureau who claim that many tenants simply do not know their rights, and do what they are told by the landlord.

Welfare officer of Queen’s Students Union, Fergus McAleavy, stated that the new proposals who could help many students who are forced to pay with their deposit for things that the landlord should cover.

However, some landlords have voiced concern over the new proposals. One landlord, Declan Boyle, stated that landlords do not always hold deposits for no reason.

The key elements of the proposals mean that landlords would not be able to withhold deposits for ‘flimsy reasons’, and an independent body would manage any disputes. It will encourage greater awareness of the rights of tenants, and give longer notice periods to quit for long term tenants.

Landlords Reminded to Research

One industry representative has recently reminded landlords that the buy-to-let property process is all about the research.

Editor of website Property Hawke, Chris Horne stated that there are a number of amateur landlords around the UK who must ensure they conduct research in a number of areas before they decide to make a purchase.

Horne added that it is important to understand the kind of property they are buying alongside the location and the rental demand.

Earlier this month Citizens Advice reported that there were three million private rented sector households across the country. As such, it is important for new landlords to understand the competition.

Once properties have been purchased, decisions still remain as to interior decoration and what should go into the home.

National Register of Landlord Proposed

There are new proposals for landlords to join a national register in order to regulate the rental property market.

The government has stated that most landlords have good intentions, but there are a minority that exploit vulnerable people, and allow anti-social behaviour in neighbourhoods. These claims were made by the Department for Communities and Local Government.

A national register of landlords would help authorities to identify these kind of landlords and would help to make the industry more professional. It is also hoped that these measures will also help to protect tenants from suddenly finding themselves without anywhere to live.

In order to sign up to the resister landlords would pay an annual fee, covering administration costs. In return they would be provided with a ‘starter pack’, standard forms, and will receive updates of any changes in regulations.

Groups in the industry were in favour of these proposals.

The director general of the Council of Mortgage Lenders (CML) stated that everyone understands the tough position that tenants are faced in when landlords can no longer afford their mortgage. Most tenants are protected, but in a small number of cases their landlords should never have been renting the property to begin with.

The director of external affairs of the Royal Institute of Chartered Surveyors (Rics) also added that this would help to ensure landlords were properly protecting deposits and keeping up with repairs.

However, there are still some concerns that some landlords will be missed.

Landlords Could Become Liable for Unpaid Bills

A new review of water charges by the government means that landlords could be made liable for tenants who do not pay their water bills.

Landlords have described this new proposal as alarming, and stated that it would surely force up the price of rent.

Water companies have recently reported falling profits and rises in debts. Northumbrian Water recently reported a 10.3% fall in profits before tax, taking it to £152.7 million up to March.

The managing director of the company, John Cuthbert, stated that the company had made provisions for bad debt raising it from £2 million to £30 million. He also stated that water companies were vulnerable to debt from domestic users due to the fact that they are not allowed to disconnect the supply if payment has not been made. Therefore, water bills are often the last ones that get paid.

In the case of tenants who owe outstanding debt, water companies often find that they have moved by the time they try to recover it. This is where the proposal comes in to make landlords liable for payments.

Recent research performed for TDX group, who provide debt liquidation services to creditors, shows that up to 5% of all households could default on their water payments this year, adding another £350 million of debt to the companies.

The proposals, drawn up by Ofwat, that would make landlords responsible for water bills would mean that property owners would have to provide a name for the person liable to pay bills. This would give landlords a reason to provide details of their tenants, at risk of having to pay bills themselves.

Huge Cost in Not Performing Inspections

A man from East Kilbride recently found himself £20,000 worse off after a tenant renting his property completely destroyed it.

Ricky Montgomery is urging other landlords to regularly check up on their tenants and properties to avoid making the same mistake. Ricky only visited the house a few months ago in order to pay a heating engineer. He couldn’t believe his eyes when he say the damage.

The shock came in the fact that internal doors had been completed ripped off, the furniture was in complete pieces and spread through the house, the walls were covered in different paint, the kitchen fittings had been destroyed, a window had been smashed and the home was generally completely destroyed.

The smell of the property was also unbearable due to the fact that litter and left over food had even left across the building.

Ricky is telling his story in the hope that it will warn others who also rent out property. If he had checked on his tenant regularly he would have been able to save him and his wife a great deal of stress and money.

After this damage and mess caused by the tenant, Ricky and his wife have been forced to remortgage the property in order to cover the cost of fixing up the property and bringing it back to a liveable condition.

Ricky told the news that he and his wife originally agreed to let the property to a young women with her two children. The rent was always paid on time through the DSS, and the tenant never phoned with any problems.

During the five years the tenant stayed at the property, she had another five children. There were therefore 6 children living at the property at the time Ricky was called out to fix the problem with the heating. A routine visit to pay an engineer suddenly led to the shock discovery of the mess and destruction to the property.

One room of the property was used for Ricky’s wife to store her father’s good furniture. The tenant used this room to pile junk on top of the furniture, so much so that the door will need to be taken off in order to get into the room to remove the mess.

In total, the damage and mess is costing up to £20,000 for repairs and replacements.