We Need More Trust Not More Legislation and Regulation

by Mary Latham

19:25 PM, 7th November 2011
About 7 years ago

We Need More Trust Not More Legislation and Regulation

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We Need More Trust Not More Legislation and Regulation

There is a lot of talk these days about tenants needing security of tenure and organisations like Shelter would like Government to change legislation to force landlords to give tenants longer tenancies.

I acknowledge that tenants do need security and, as a landlord, I want to keep my tenants for as long as possible. Many people need to put down roots and build a life in an area but it is often difficult for them to do this when they are forced to move to a new home every six or twelve months.

On the other hand many mortgage suppliers will not lend to a landlord who offers tenancies that are longer than 12 months. Landlords are also nervous that a tenant may turn out to be a problem and a long tenancy means a difficult eviction.

So what is the answer? How can we, as landlords, give our prospective tenants the security they need while at the same time meeting the requirement of our lenders and covering our backs against the undesirable tenants forcing us to go through long and complicated legal procedures to remove them?

In my opinion it comes down to trust. The two parties of a tenancy agreement are both taking a risk. The tenant is risking signing up for a property that looks OK but may not be well maintained during the tenancy. There is also the risk that the landlord, who is standing there with a broad smile on his face at the viewing, may turn into an intrusive and uncooperative person once the agreement is signed. The risk for the landlord is that the prospective tenant, who has plausible reasons about why they are looking for a new home, may have been a poor tenant and has been evicted by a previous landlord, the local authority or an RSL. So how do we reduce the risk for both parties?

Knowledge is power. Many tenants now know more about their legal rights than landlords do and if they don’t know they will soon find a man who does. It is dangerous for landlords to remain ignorant of the law and regulation until they find themselves in a situation that may well cost them dearly in time, stress and money. I am always amazed at the lack of knowledge of some landlords; even quite experienced, hands on landlords often do not realise that they are putting themselves and their business at risk.

One of the most common reasons I find is that the person who owns the property sees himself as a property investor not a landlord. There is very little legislation that will affect a person who simply buys a property and keeps it empty while it increases in value – in fact there is increasing pressure to bring empty property back into use, and even doing this now comes at a cost. A person who lets his investment property is a landlord in the eyes of the law and he must meet all the legislation and regulation that surrounds that. Many investors think that by using an Agent to let and manage the property they can be “passive investors” but this simply is not true. Anything that the Agent does while working on a landlord behalf has consequences for the landlord and it is vital that the investor is fully aware of those consequences before choosing a Agent. Like landlords and tenants, some Agents do an excellent job while other do not. So into the mix of “trust” we must put the Agent.

There are tenants who will only let through an Agent because they do not trust landlords. There are tenants who will only let from a landlord because they do not trust Agents. There are landlords who specialise is letting to people with pets and others who will not take pet owners. There are landlords who advertise for those tenants who pay their rent with LHA and other landlords who advertise “No DSS”. These “preferences” are either based on perception, reputation, poor experiences or ignorance, but whatever the basis it all comes down to lack of trust.

I do not believe that the answer is more regulation or legislation, in my opinion we all need more education.

Landlords

  • Find out what legislation and regulation you need to meet by becoming a member of an accreditation scheme that is based on education, like MLAS -see www.mlas-online.co.uk
  • Join a landlords association, like National Landlords Association, where you will have the support of the advice line, landlord library, national accreditation, forms that have been checked and are safe to use, a local representative who knows the area and will talk you through issues and support you with local authorities, local meetings where you can network with local landlords and others who will help your business
  • Build up your credibility with membership of organisations like NLA and accreditation schemes that are based on education rather than property inspection. Show your membership cards to prospective tenants. Talk to your local authorities and attend their landlords fora. Read online articles, on sites like here Propety118, written by people who you find credible
  • Become a member of sites where there is specialist knowledge for you to tap into (see www.landlordlawblog.co.uk)
  • Ask questions on fora, like Property Tribes where people who know the business will share that knowledge freely
  • When choosing an Agent remember that he will be working on your behalf and that you cannot devolve your legal responsibilities to him, make certain that he knows what he is doing.
  • Show prospective tenants “thank you” letters from previous tenants or better still get them to complete a feedback form after the tenancy has ended and the deposit has been returned.
  • Take the time to discuss the tenancy agreement with new tenants and give them a blank copy to take away and read for 24 hours before signing
  • Talk to your tenants as an equal, we need them as much as they need us and no one responds well to being talked down to.

Tenants

  • Check that the landlord is in the business for the long term, ask what organisations he or she belongs to, how long he has been letting, how long he intends to let the property, whether you he will increase the length of your tenancy if your relationship works out well, how much notice he will give and how often he might increase the rent, which service he will use to protect your deposit, what you must do if your need a repair or replacement.
  • When viewing a property take bank statements, rent books or receipts to show that you have a good payment record. Also take utility bills to show where you have been living recently and that you have met your financial obligations. Take proof that you are who you say you are, passport, driving licence, letters from Housing Benefits or other official departments, identity cards, proof of national insurance number and date of birth
  • Take paperwork to show your LHA entitlement
  • Ask for a copy of the tenancy agreement that you will be signing and take it away and read it, take advice if necessary but make certain that you are comfortable with all the terms and conditions. Ask for explanations for any terms that are not clear and get confirmation by email
  • Check the EPC and work out if you are going to be able to afford to heat this property
  • When your tenancy begins, take photographs and read the inventory. Email or write to the landlord if there are any errors on the inventory at the start of the tenancy
  • Talk to your landlord, do not be nervous, we need you as tenants just as you need our properties to live in. If there is a problem it will not be solved without discussion and most landlords will be patient with a rent payment that is a couple of days late so long as you have talked to us.

Agents

  • Please do not take the money from landlords and tenants unless you are well informed and set up to do the job that you are offering to do
  • Know what your responsibilities are to both parties – especially if both are paying fees
  • Know what you can and cannot do on a landlords behalf
  • Only work for landlords who enable you to do the job as it needs to be done
    I am not suggesting that landlord stop doing reference and credit checks on prospective tenants, that is a normal part of any business.

Rome was not built in a day and trust may take even longer, but it is an issue that we all need to address because it is only when we all begin to feel that we can trust each other that both landlords and our tenants will feel more secure. Perhaps at that point we will not be put under pressure to change our safe business practices like initial 6 months tenancies?



Comments

Ben Reeve-Lewis

20:41 PM, 7th November 2011
About 7 years ago

Spot on Mary.

For as long as I can remember I have thought that the biggest problem with letting in the UK has been the casual way that so many landlords approach it, the 'Passive investor; that you refer to.

For some reason I always think of a dairy herd. Nobody in their right mind would buy a field and say "Alright....I'll give it a whirl" and yet so many new landlords do just that.

In his excellent book "Kitchen Confidential", chef Anthony Bourdain tells it straight about the cheffing business. He says at one point how so many people use redundancy money or similar windfall to start a restaurant, thinking it will be similar to just throwing a dinner party everynight and how when they do, all the pro restaurants in town get on the phone and lay bets on how long they will last, laying claim to the expensive new cookers they bought that in 6 month's time the pro's will buy off them for a song to stave off bankruptcy.

Similarly I think many tenants think that if they pay £1,000 a month rent the landlord is £1,000 a month richer. If you never have to think of overheads you presume they dont exist. When I was a landlord my 2 tenants were on HB and I waited 2 months for the rent to come through, it was £1,500. The same week the cheque arrived the C/H boiler blew up. Guess how much it cost? haha

Mary Latham

21:51 PM, 7th November 2011
About 7 years ago

I don't think that it helps that Inland Revenue do not consider letting residential property is a business and treat it as investment for tax purposes. In my opinion this gives out a bad message to those who become landlords. A landlord cannot get rollover relief, cannot charge the time he spends doing the job, cannot offset his losses against other income etc. What I cannot get my head around is why those who let holiday lets ARE treated as a business surely this is less of a business, often seasonal, than letting a property all the year around?

It is time that the Government made up its mind, letting residential property needs to be done professionally and they continually put legislation in place - like HMO and Selective Licensing that proves that we are in a business, if its not a business why do we need to be Licensed to do it? If Inland Revenue came into line perhaps the message that letting residential property IS NOT A PASSIVE INVESTMENT would get through? In my opinion this would have a bigger impact on the thinking of landlords than more legislation and regulation and would also be a better incentive for people to buy and let much needed homes

Mark Alexander

21:53 PM, 7th November 2011
About 7 years ago

Mary, I wish you to become Housing Minister. Great comment


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