£1million spent on Travel Lodge accommodation in PRS perfect storm

Reply to the comment left by "Amar Dev" at "01/10/2016 - 09:03":

Hi Amar

It was a sort of "tongue in cheek" comment, but also meant to highlight that most landlords (and developers) are going to need to change their letting strategies in the next few months and years as the rental market place is changing so rapidly that the "standard" buy a house and rent it out sort of scenario is not going to work any more.

My strategy has been to move away from this sort of arrangement, and I have radically changed the way that I do things over the past few years as simply being a landlord and letting to tenants on benefits did not work, because it takes ten profitable tenancies to pay for the damage that one bad tenant can do, and with the HB/LHA restrictions and the reduced benefit cap coming in next month, it is virtually impossible to make any profit from such tenancies so such losses cannot be covered.

For landlords with standard houses, then I really believe that Rent to Rent arrangements can work well for them (so long as the Rent to Rent company honours their agreements, and expectations from all parties are reasonable and understood). However, for developers, it may perhaps be a case of looking at providing hotels/travellodge style accommodation for use as nightly paid emergency accommodation.

I have quite a few properties in South Yorkshire, so have contact with homelessness organisations in the area who often need to place people at short notice. If you want to discuss things further, please e-mail me robert.mellors@hotmail.co.uk

Hi Robert

I've just read your post on property 118 with interest. I have for a while now been tearing my hair out with the local council regarding their negative opinions, perceptions and stance on the rights of landlords.

I'd love to get back in the driving seat by offering hotel style accommodation instead of lovely single units that get trashed and left with arrears that LHA will not pay. They believe what rogue tenants tell them, they encourage tenants to open us off with demanding section 21 and court action before they'll even consider rejoining them. Tenants know that we are forced to do this if rent isn't paid so the nightmare starts. I'm in court again next month with rogue tenant being supported and advised by CAB - 7 months rent arrears, growing g hash in both upstairs bedrooms, house soaking and trashed and CAB advising him to sue me!!

It's time I got control back but I feel alone and isolated fighting huge organisations who seem to want to obliterate us!

Sent from my iPhone

Reply to the comment left by "pheonix mich" at "01/10/2016 - 19:48":

Hi Pheonix

What is possible with your existing properties I don't know, because I do not know the properties or areas or your letting strategies or your personal skills, knowledge, risk aversion, etc, but I do know that it is virtually impossible for private landlords to cover their costs now (let alone make a profit) when they are doing standard lettings to DSS tenants, and the situation is going to get much worse when all the HB entitlements reduce next month (due to the reducing Benefit Cap).

Hotel/guest house/travellodge style properties may give you far more control over who you have in, and how easily you can evict them if they cause a problem, as hotels/B&Bs/travellodges, etc do not grant tenancies and are thus not usually subject to the Protection from Eviction Act (PEA). BUT, you would need to research this in some detail as it is possible for such places to unwittingly create tenancies/licences that do become subject to the PEA. Also of course, the property management (staffing) situation for a hotel is very different to that of a normal HMO letting, so you would need to consider the implications of this.

If your properties are standard houses, then they may not be suitable for use as hotels/B&B/travellodge style rooms, so if you want to reduce your risks and hassle then a Rent to Rent lease arrangement with a council or housing association (or other organisation) may give you the guaranteed rent you require. This is likely to be less than what you could let the property for if doing the letting yourself, but it would drastically reduce your risks and hassle so long as the rent to rent company honours their agreements (there are good honest Rent to Rent companies, but there are also some con-artists (or incompetent amateurs) out there, so beware).

In relation to offering hotel style accommodation, you could negotiate some sort of deal with the local authority whereby they can place homeless people (who they consider to be in "priority need") with you and the council pay x amount per night, or you could simply offer rooms on a nightly basis for any homeless person and they claim Housing Benefit at the LHA shared room rate (not much money, and still lots of damage, but at least much easier to evict the residents if necessary).

There are other options, but they get much more complicated/specialist.

What .... and leave open ended AST's behind ?

If Council is paying on behalf of tenant, then Council should recognize the obligation it is sponsoring !

Get tough.

Thanks Robert, I have 16 years experience, currently have 31 houses mainly in stoke-on-Trent, Newcastle area, I manage and maintain them all. My strategy is to sell slowly over several years, consolidate the rest, refurbish all started about 6 years ago and is on going, I don't let to LHA unless disabled with genuine reason for being on benefits, mainly working families or shared working houses. As Refurbs tail off capital being paid to reduce IOL's.
Hotel strategy probably not suitable for my houses, I'd be interested in the more complex ideas.

Reply to the comment left by "pheonix mich" at "01/10/2016 - 21:59":

Hi Pheonix Mich

If your properties are not let to LHA tenants, then the benefit cap is not an issue for you. Likewise, those who receive middle rate DLA or PIP (disability benefits) are not affected by the Benefit Cap. If you are not reliant upon LHA tenants, and your properties will let easily to working tenants, then you probably do not need to consider changing your letting strategy, so do not need to consider hotel/travellodge or other strategies. Rents will continue to increase due to the "tenant tax" and other increased costs (and increasing tenant demand), so if your properties attract tenants who can pay the rent without relying on benefits then this should not be a problem for you. Of course there will be an occasional tenant who causes problems and ends up costing you money, but if you insist on a rent guarantor each time then you can limit the financial damage from those occasional bad tenants.

Paying down your mortgages as and when possible is also a good idea as that will reduce the effect of the "tenant tax" (clause 24).

From what you have told me, I do not think that the alternative strategies are required, just keep doing as you are doing, always get a rent guarantor, and beware of taking tenants on benefits (unless they are exempt from the Benefit Cap, and can pay any top ups required).

A Government spokesman (who I believe is a Peterborough MP) said "Councils have a responsibility to house families in settled accommodation as quickly as possible".

The implication appears to be that because they have this responsibilitythere can be no problem.

Reply to the comment left by "Michael Barnes" at "02/10/2016 - 09:31":

Michael, I would nominate that for comment of the year!

Herein lies the problem and the disconnect between national government and local government; between national government and the people. It is true for many areas of daily life where the authorities are concerned.

A local landlord who has recently become a Councillor gave a talk to our Landlord Association about how almost everyone working within the council hides issues from the person above them. The top boss, and by extension Westminster, no doubt, believe all is running smoothly.

Reply to the comment left by "Robert Mellors" at "01/10/2016 - 23:59":

Thank you Robert for your reply, it's very reassuring.
With regard to guarantors, I didn't realise until recently that they can give notice after the fixed term period of an AST has expired. To save time and cost I allow my tenancies to roll over on to periodic. Is there a way around this, other than constantly reissuing the tenancy?

Reply to the comment left by "pheonix mich" at "03/10/2016 - 06:21":

Hi Pheonix Mich

If you are allowing your tenancies to roll over into periodic tenancies then make sure the AST says that the initial term is 6 months thereafter it will become a contractual monthly periodic tenancy. Use the word "contractual" otherwise if the tenant abandons the property I believe that you may become liable for the Council Tax, whereas if it is a contractual periodic (rather than a statutory periodic) then the tenant remains liable until the tenancy is ended properly (e.g. by notice, surrender, or court order).

In relation to the rent guarantors, I use wording in my Deed of Guarantee document, that makes it clear that the rent guarantor's liability continues into any subsequent tenancies (or any statutory or contractual continuation of the tenancy), unless or until the rent is increased by more than 20%. I don't know how enforceable this would be in law, but so far it has never been challenged, and it does make it very clear exactly what the rent guarantor is agreeing to be liable for (only if the tenant defaults of course). You have already sent me your e-mail address, so I will e-mail you a copy which you are welcome to adapt for your own use (though as a legal document it may be best to get legal advice before adopting or adapting this).

In the last tenancy I issued, I actually went for the tenant who could offer two rent guarantors. Most landlords would not think to ask for two, but if someone can offer two guarantors then this may be the deciding factor in them being offered the tenancy rather than someone else, so it is a good idea for landlords to ask this, and a good idea for tenants to offer this. - If you don't ask, you don't get.