Can Rent 2 Rent be made safer? What assurances are needed?

Can Rent 2 Rent be made safer? What assurances are needed?

14:02 PM, 26th October 2022, About A year ago 8

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Hello. Private “Rent 2 Rent” operators generally have a bad reputation, there are a lot of operators that have little or no experience, and have simply been “sold” the idea on a training course. Many have little or no capital to back them up when things go wrong, and there’s very little to stop them simply ditching the property and leaving the owner landlord with the headache of removing bad tenants, and repairing damaged property.

There are of course some who are much better than this and who may be operating ethically, BUT, it may also be that they’ve been lucky enough to find great tenants and have virtually no voids, so they’ve not been in a position whereby they’ve defaulted.

Social “Rent 2 Rent” operators generally have a much better reputation, they may have much more experience of letting to their specific tenant cohort, and they have access to the staffing and funding of their organisation (housing association, charity, council, etc). Social “Rent 2 Rent” is often called by other names, e.g. “private sector leasing scheme”, but it is essentially the same business model, i.e. lease from a private owner landlord, and sublet (in whole or in part) to tenants.

However, even with the back up of the organisation, there are instances where the owner landlords have been disappointed by the deal, e.g. lower rents, poor management, repairs/maintenance not carried out, property handed back in poor condition (with no financial recompense). There are of course ethical social/charitable rent 2 rent operators who may have been operating for many years and go out of their way to keep owner landlords happy, but their reputations are tarnished by those who do not operate to such high standards.

What could be done to make the Rent 2 Rent proposition more attractive to owner landlords?

As the Director of a housing association that operates a Rent 2 Rent model in Sheffield (for use as supported housing for the homeless), I’ve been asking myself this question, and here are the ideas I’ve come up with (so far):

1. Pay a rent/damage bond equal to 6 months rent. As a landlord to housing association lease is not covered by the Tenant Fees Act 2019, there is no 5 week maximum deposit/bond limit, so the parties to the lease can agree whatever deposit/bond they wish.

2. Ensure that the lease agreement is fully understood by both parties, and give examples of what would happen in “worst case” type scenarios. Ensure that issues such as redecorating and repairing responsibilities are clear.

3. Offer a personal guarantee to “back up” the business guarantee, e.g. if the housing association defaults on the lease then the Director can be held jointly responsible for costs. This would perhaps be equivalent to a “rent guarantor”.

I’m not aware of any organisation that currently offers 1 & 3 above, but if they did, would this be sufficient?

What other reassurances would an owner landlord ideally want from a Rent 2 Rent operator, to make a Rent 2 Rent offer more attractive?

If you would NEVER consider a Rent 2 Rent offer, regardless of the incentives and guarantees, why is this?

Thanks,

Robert


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Comments

Reluctant Landlord

15:09 PM, 26th October 2022, About A year ago

I would consider a R2R but the overriding issue for me is the state of the property at the end and the agreement ENSURING it is made good to the same standard as was at the start of the contract. There could be a number of tenants passing through the property over the contractual R2R period (4 - 6 years?) or there could be very little. The property for sure should be in no less a state of condition than it was at the start.
Would it mean exemption from Selective Licencing? If the R2R were using to provide it for temp or emergency accommodation purposes then the council would have the direct contract with the tenant and so be the direct landlord. The property should therefore be exempt as it is not technically a PRS property.
The council should hold a register of all their preferred R2R providers. If they are choosing X supplier then they should be confident in that provider so a LL could then look to the register to determine which R2R supplier to offer their property to in the first instance.

Reluctant Landlord

15:16 PM, 26th October 2022, About A year ago

I forgot to add I have been asking Birmingham Council for over a year to provide me with details of any of their R2R equivalent suppliers who want three of my four bed houses.

The council have decided that in these postcodes no more HMO's are required so no more MHO licences are being given. They want to encourage the houses to be used for families.
BUT
I cant get an answer out of them as to who I approach to offer my houses to. The have openly said they don't deal directly with LL's but have not provided any other direction since. Even the local MP (funnily enough labour) said only to keep her updated as to my progress! What progress?

Housing crisis, extortionate em/temp B&B costs and I have houses for families left empty.

They are now up for sale.....

David

17:47 PM, 26th October 2022, About A year ago

There are clearly many issues, but one that I think many social housing provider would struggle with is returning possession to the landlord at the end of the term. I assume that the author's organisation uses licence agreements, but the majority of social housing tenants are going to have greater protection and it could take many months to evict them.

Robert M

12:16 PM, 31st October 2022, About A year ago

Reply to the comment left by DSR at 26/10/2022 - 15:09
I can't comment as to the situation in relation to Selective Licencing, but I suspect that to some extent it may depend on who the R2R operator is, as like you say, if it is a council that is acting as the R2R operator then the rules may be different.

In relation to the condition of the property upon return (handing back), then yes it should be in essentially the same condition, less normal wear and tear. If damage has occurred then the R2R operator should put this right, either by carrying out repairs or paying you compensation for the cost of any repairs required due to the damage.

Robert M

12:20 PM, 31st October 2022, About A year ago

Reply to the comment left by DSR at 26/10/2022 - 15:16
Although they may have a local policy of not wanting any more HMOs in those areas, the council could of course lease the properties from you if they wished, for use as homeless family lets. However, this probably would not be feasible for other R2R operators, as there would be insufficient margin to cover the risks.

Robert M

12:25 PM, 31st October 2022, About A year ago

Reply to the comment left by David at 26/10/2022 - 17:47
Yes, it would be more difficult for a R2R operator to return the property with vacant possession on a particular date, as it is not always straightforward removing the existing sub-tenants. However, so long as all parties could be reasonably flexible on hand back dates, and the R2R operator continued paying the rent until such time as vacant possession was given, then the eventual outcome would be the same and the landlord would not lose out.

Reluctant Landlord

13:19 PM, 1st November 2022, About A year ago

Reply to the comment left by Robert M at 31/10/2022 - 12:20
but getting the Council to reply about this is the issue! I'm offering them property and they are disinterested. Its ridiculous!

Reluctant Landlord

13:20 PM, 1st November 2022, About A year ago

Reply to the comment left by Robert M at 31/10/2022 - 12:16
Anyone know a R2R who operates on Birmingham???

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