First time UK landlords beware of novice letting agents

The credit crunch and falling property prices have badly affected the housing market. UK homeowners who are unable to sell are choosing to become landlords.

First time landlords who are more interested in getting a steady income must be aware of novice letting agents who may not be in a position to provide the right advice due to lack of experience in the housing sector.

According to the ex-president of the Association of Residential Letting Agents, a number of desperate real estate agents have switched over their role to become letting agents or added lettings to their business.

According to Robert Jordan, chairman of Jordan, with 6 offices in the UK, more estate agents are becoming letting agents and being unqualified would be putting more tenants and landlords at risk. He said there were basic differences in being a letting agent and an estate agent.

According to Jordan, unqualified agents had no bonded client accounts hence there was greater risk of clients losing money. Landlords and tenants get protection for deposit and rent money by depositing an amount in a bonded account which is covered by the deposit compensation scheme.

Jordan’s advice is to use services of a reputable agent who should be a member of ARLA with bonded deposit scheme.

Overseas students urged to understand Tenant Deposit Protection Rules

Colleges and universities are being reminded by the online tenancy deposit firm, mydeposits.co.uk to make students understand Tenant Deposit Protection Rules to safeguard their deposit money.

The firm is concerned that most of the 48,000 overseas students in the UK may not be aware of their rights regarding tenancy deposit.

With effect from April 2007, landlords and letting agents are permitted to accept tenant deposit only if they follow Tenant Deposit Protection Rules laid down by the Government for the tenants in the UK.

The tenants have now got the resource in the form of new legislation to get back their deposit from the erring landlords who fail to refund deposit after the expiry of lease agreement.

The firm mydeposits.co.uk has suggested that students needed to be motivated to demand from landlord proof that their deposit money has been put in the Government-approved scheme. A student in the UK pays on an average £245 per month as rent. According to the firm’s chairman David Salusbury, educational institutions could play important role in making students understand laws governing their rented accommodation.

The firms dealing with tenant deposit protection usually render free impartial service in resolution of disputes over deduction of money by a landlord.

The new internet-only service makes tenancy deposit protection cheap

The UK’s Government-approved tenancy deposit protection scheme has introduced an internet-only service for the landlords for hassle free deposits.

The landlords would also benefit from reduced fees since the administrative costs of new service ‘mydeposits lite’ are comparatively much lower.

The landlords would not be required to hand over tenant’s deposit to a third party; instead they could pay just £17.50 fees including VAT and protect deposits up to £300 with ‘mydeposits.co.uk’ website. The website enables them to keep hold of their deposit amounts.

Since April 2007, it is mandatory for all landlords in Wales and England to protect their tenants’ deposits with a Government-approved scheme.

Chairman of the ‘mydeposits.co.uk’, David Salusbury, welcomed the launch of mydeposits lite saying that tenancy deposit protection is an essential part of a landlords’ legal responsibilities and the ‘mydeposits lite’ service will eliminate the need to hand over their deposits to a third party. He highlighted the fact that as it is an internet-only service, landlords would spend very little time in registering deposits. He also explained that low administrative costs of the service allowed mydeposits.co.uk to pass savings on to the landlords.

Landlords in England and Wales have been cautioned that failure to comply with the legislation would bring restrictions on their right to seek possession and they would be forced to shed compensation to the tenant three times the deposit amount.

On a similar note, places like London have a high ratio of letters and a good way to ensure a deposit is returned is to leave the property as it was when you arrived. Take notes of any problems you see when you arrive and have your landlord sign to agree.  You should also ensure you clean the property, utilising a service for end of tenancy cleaning in London for example ensures everywhere is left spic and span.

Falling house prices are creating investment opportunities

The fall in the property prices in the UK has continued for more than a year now. This was revealed in the findings of the survey conducted by leading estate agency Chesterton.

Chesterton’s “Poll of Polls” pointed out that there was drop to £184,333 in the average residential price in England and Wales.

According to the firm, figures indicated that prices have been falling for 13 months consecutively and were going down across all regions. Bigger falls were being witnessed in London and the South West during this time.

Chesterton appointed the Centre for Economics and Business Research (CEBR) to conduct survey on its behalf.

According to CEBR chief executive Douglas Mc Williams, the cautious approach of the financial institutions towards lending has impacted all levels and falls in house prices were also taking pace at the top end of the housing market.

The chief executive of Chesterton, Robert Bartlett, informed that some highly placed property professionals are making the most of the drop in prices. He remarked that cash rich buyers had good opportunity to take full advantage of the situation. The firm reported that five deals of cash sales were made in Kensington, London last month.

UK landlords should upgrade to cavity walls to reduce energy bills

The introduction of the Energy Performance Certificate from October 1 for landlords and house sellers has made the improvement of energy efficiency all the more important from a savings point of view, said Mike Malina, an energy efficiency expert.

Malina has suggested installation of cavity wall insulation to those looking at reducing the energy bills of their homes and striving to improve their EPC rating. He commented that expensive double glazed windows were mainly cosmetic. He felt that one should not invest on double glazed windows unless there was drastic need for replacement.

He argued that if the windows were in sound condition, replacing them with a double-glazed variety was not a good idea since many more cost-effective approaches could be undertaken first to get much higher returns on investment.

Malina recommended thermostatic radio valves and draft stripping in homes to enhance energy efficiency without the need to spend large amounts.

An improvement in energy efficiency would also mean reduction in carbon emission. According to the department of Communities and Local Government reports the existing old UK homes emitted 1.6 tonnes of carbon on average per year which was almost twice (0.9 tonnes) the average in the newly constructed homes.

The Government has introduced the Landlords’ Energy saving Allowance (LESA), which is a gift to the savers of energy. It is a tax break which entitles landlords for tax returns against expenses incurred in installing energy saving items or equipments.

Insulations help in consumption reduction. Amount spent on insulations, hot water systems and cavity wall will attract tax return up to maximum £1,500 per property.

A caution note for landlords regarding tax liabilities

It is important that buy-to-let landlords know about their tax liabilities and keep their accounts in order before impending crackdown by HM Revenue & Customs.

According to the Target Chartered Accountants, tax officers have been empowered to visit landlords’ homes and verify their documents. It cautioned that HMRC had gathered details of the landlords through the UK and overseas letting agents and was planning a crackdown on tax evaders.

According to Mark Tuckwell at Target, a misconception has been prevailing amongst the landlords that loss making owners were not supposed to declare their income. HMRC however does not hold the same view. Those having a source of income are supposed to declare income and will be liable for any inquiry on this issue by the tax officers. Even if there was no tax liability, the enquiry could cause lots of hassles and incur significant cost.

Mark also mentioned that many landlords mistakenly believed that they would never be detected by the taxman. HMRC has an easy access to the information on relevant properties to track those not disclosing their incomes. He advises that landlords should avoid knock on their doors and spare themselves of heavy penalties by voluntarily disclosing their income. Voluntary disclosures are being rewarded with generous concessions by the authorities.

Mark also points out that many landlords who did not take advice from tax consultants were unnecessarily paying more tax due to ignorance about allowable expenses on property. He suggested landlords to avail of experts’ advice on tax matters.

Landlords getting high return from University towns

The latest University Town House Price Review by Halifax, revealed that landlords letting their properties in university towns were enjoying high returns, while others are helplessly suffering from unprecedented downslide of the property market.

The Halifax survey, which tracked movements of the house prices in university towns across the UK, pointed out that buy-to-let landlords and parents who bought properties in university towns for their student children have been benefitting handsomely from returns on investment in the last 5 years.

The study highlighted that in 35 out of 64 towns covered under the survey, the house prices were higher by £20,335 on average than those prevailing in the surrounding areas. Winchester attracted highest premium of £114,489, nearly 50% above the average price for Hampshire.

The other university towns attracting premium above £20,000 included Bath (43%), Warwick (46%), Cambridge (44%), Oxford (14%), Stirling (13%) and Newcastle (16%).

According to Halifax, students paid £96 as the average weekly rent for private accommodation. Region wise costs varied from £116 in Greater London to £64 in Northern Ireland. Manchester, with the largest student population, witnessed 63% increase in the house prices in past 5 years as compared to national average of 44%.

Guildford is reported to be the costliest university town in the UK where average house cost stood at £363,503; followed by Winchester at £343,332 and Bath at £326,403. Hull is the only university town with lowest average cost at £124,108.

All about Energy Performance Certificate (EPC)

Effective from October 1, landlords in the UK letting their property are legally bound to furnish Energy Performance Certificate to tenants. Thousands of second property owners are confused over what they are expected to do.

An Energy Performance Certificate (EPC) grades buildings on the basis of energy efficiency and carbon emissions. ‘A’ grade is assigned to very efficient and ‘G’ graded to poorly rated.

The report is prepared by the officially appointed qualified energy assessors. An EPC is always accompanied by recommendations which list various cost effective measures and other improvements to enhance the energy ratings of the property. It could include recommendation for installing low carbon-generating systems. The certificate also provides information as to which grade the property would be elevated if all recommendations were implemented by the owner.

EPC is mandatory for those who let their property to a new tenant, with exceptions to those landlords who take lodgers or let their second home for holiday rental.

If a property is bought for children to live in and if some of its rooms were let while children were studying in university, an EPC would not be needed.

It can cost from 50 pounds to 150 pounds, depending on the size of the property and region.

The certificate is valid for 10 years for one property. Failure to obtain a certificate results in a fine of up to 200 pounds plus fees for completion of an energy assessment.

If your property is already let, you would not require an EPC until it is rented to a new customer.

UK Landlords urged to comply with Energy Performance Certificate

The UK landlords have been urged by Paragon Mortgages to comply with Energy Performance Certificate (EPC) regulation effective October 2008.

It would be legally binding on landlords to show an EPC to prospective tenants while offering a property for rent. Failure to comply will incur a fine and would prevent the landlord from letting. This could result in longer void periods.

Paragon’s trends research revealed that a large number of landlords still did not obtain EPC. The data indicated that a whopping 81% had no EPC for any of their rental property while only 5% were reported having obtained EPC for all of their properties till date.

27% of landlords were planning to get the certificate before October 1, but 54% would like to wait until the expiry of the current agreement. 8% were ready to take a risk by waiting until enforcement officers contacted them regarding an EPC. 11% flatly refused to obtain the EPC for any of their rental properties.

Paragon Mortgage’s M.D. John Heron warned that landlords could not afford to ignore regulations since it would prolong void periods and hoped that more number of landlords would comply with regulation pretty quickly before expiry of 6-months Assured Short-hold Tenancies. He advised landlords to get EPCs before letting property next time.

Tips for presenting a property to let

Property letting is one of the most opted for alternatives by property owners in the UK. Having finalised the rental price for your property to let, the next important step in letting is the presentation of property to the potential tenant. Offering the property in good order is as vital as pitching the right price. A good presentation of the property generates initial interest in the tenant.

You should describe your property in brief, covering information about its internal and external order and the facilities available locally. The first thing to attract potential tenants would obviously be the price and secondly the images of property which may be presented through photographs. The tenant should be shown internal shots of the property first before showing exterior.

While taking photographs for property to let advertisement, tide up areas like kitchen and lounge nicely. Remove all the clutter and mess from the place. Offer vision of a nice place to live in to the potential tenant. A clean and tidy lounge or kitchen photograph in the ad would generate more enquiries than poorly presented interiors. It’s also worthwhile having your property professionally cleaned to make it more presentable, and if you’re based in the capital, using professional home cleaners in London is a good idea.

Apart from presenting photographs, potential tenants should also be furnished some more details which may include:

• Number of bedrooms and bathrooms
• Facilities in kitchen
• List of devices such as fridge, washing machine etc.
• Furnishing, décor style and quality
• Flooring
• External features – garden, vehicle parking area
• Utility bills and council tax details

A good property description would help you in gaining more interest in your property and getting a good tenant for letting.