The private rental sector (PRS) is in danger of becoming as hot a political potato as the EU.
Labour currently has no intention of a referendum on EU membership while Ukip has driven the Tories to despair with its relentless campaign to abandon the EU - and a referendum policy as a populist idea.
But what could be more populist than introducing controls for the PRS, driven by the urge to do highly visible things such as ending letting agents’ fees, which Labour has failed to push through before the General Election in May 2015 but which it promises will be on its agenda, along with three year tenancy terms and fixed rents?
Rent caps in places of high property values are one of the biggest fears that could drive the PRS into terminal decline. Yields become ever smaller as rents are constrained during periods of strong capital growth. Many owners would find it more beneficial to cash in and invest the money somewhere more sensible. Even a bank deposit account with three per cent interest could be better than renting at two per cent yield with all the accompanying risks of repairs, dilapidations, and the costs of regaining possession when yesterday’s dream tenant becomes tomorrow’s nightmare as their economic circumstances change.
Figures from ARLA show that 17 per cent of landlords are expected to sell one or all of their properties in the next 12 months, the highest proportion since 2008. The same source also revealed 59 per cent of lettings agents are reporting more would-be tenants than properties available. Just as the PRS needs to retain landlords, many are plotting their escape route to reap the benefits of the property price surge.
When you talk to lawyers and owners of high end properties in London’s prime quarters it becomes apparent that what interests buyers more is long term capital growth than short term low yield income. Buy to let is out, buy to reap substantial profit could well be coming in if it’s not here already.
Rent caps across the country are unrealistic because there are so many regional variations in property prices and therefore what seems like a fair return on investment. Are we to return to the days of the regional Rent Tribunals as the first avenue of escape for tenants served with notice to quit? The Tribunals, chaired by lawyers, could fix rents as well as deflect a notice to quit and were readily accessible to tenants with some savvy and no lawyer.
With commentators predicting that in very short time there will be more private sector renters than owners, restrictions on landlords and lettings agents could be as good for Ed Miliband as the right to buy council houses turned out for Margaret Thatcher.
Longer tenancies are also a real issue. A tenant who seems heaven-sent on day one could be the tenant from hell by month seven but then it would be too late to serve notice so easily. Employers, who see their staff and assess their performance every day, get four times the trial period it’s proposed to give landlords even though contact with the tenant is frequently non-existent and, at best, sporadic. Three year tenancies by default with a six month trial period will be seen as too risky to be realistic by many landlords. What is designed to protect tenants could actually reduce their chances of finding a home in the first place if availability shrinks. Rents would then rise because the cap is intended to be assessed through market conditions.
Lettings agents’ fees are another conundrum. It’s wrong, it’s said, for agents to charge for referencing or administration such as the inventory but under current plans landlords, and their agents by default, will soon be responsible for checking the immigration status of tenants and their right to live and work in the UK. This would need to apply to every tenant, with a birth certificate and some form of photographic identification to be safe even for those claiming UK birth and lifelong residence. Let to the wrong person and there’s a £3,000 penalty. If that person is working without the right to do so the penalties are stiffer still. When a tenant with the right to live in the UK arrives on the doorstep and it then transpires they don’t have the right to the employment they are using to pay the rent what does the landlord do - allow the tenancy because there’s no right to deny it and then report the tenant for paying the rent?
Someone has to fund the lettings agent’s time in processing all this as Civil Service substitutes because few landlords will want to undertake the task. If there are no fees for tenants, only for landlords, then rents will have to rise to cover the cost. But when the rent is capped, how can the cost of fees be applied?
There is too much fag packet planning and not enough real thought going into all this regardless of which political party happens to be having another bright idea today. Everyone is agreed on the importance of the PRS, everyone agrees it could be fairer all round, but who is going to sit down and work it all out as a policy and not a series of knee-jerk responses to the latest comment article?
Lisa Simon,
Partner
Head of Residential Lettings
T: 020 7518 3234
E: lisa.simon@carterjonas.co.uk
A property blog written and authored by our specialist blogging team, discussing all and any matter relating to the residential, rural and commercial property markets.
Showing posts with label property management. Show all posts
Showing posts with label property management. Show all posts
Friday, 27 June 2014
Monday, 28 April 2014
For those farmers affected by the floods
Flood affected farmers in this area will welcome the news that the government has announced they can apply for grants of up to £35,000 to help them recover from the devastating effects of last winter’s weather which affected many farmers on the Somerset Levels.
The money comes from the “Farm Recovery Fund” which was set up by DEFRA after Prince Charles and a succession of politicians, including David Cameron, visited Somerset to see the grim reality of what was happening for themselves.
DEFRA opened the fund on 28th February and initially have been taking bids for up to £5000 per farm, but from 28th April, farmers who have been particularly badly affected can apply for additional funding up to a total of £35,000 in total. This includes any money they have already been awarded under the initial bid process.
DEFRA secretary Owen Patterson re-visited the Levels on 15th April to see how farmers are recovering which is when he announced the second phase of the grant application to help farmers meet the costs “putting flooded farmland back in to production”.
James Winslade, who is the beef farmer whose cattle we saw so dramatically evacuated as the flood waters rapidly rose, engulfing his farm and the nearby village of Moorland, said, “It’s good that the government has acknowledged the scale of the problem. We have insurance but it mostly covers damage caused by fire and not floods. I will definitely apply for this additional grant money. Unless I apply for this grant I will not cope”.
What is clear is that although the weather has improved and superficially the grass looks as though it is growing, the land which was flooded to a significant depth for several months will not be productive for some time. This will not only impact on the availability of grazing for cattle which should be outside now, but it will impact on the amount of fodder which will be able to be conserved for next winter.
Thus farmers such as James Winslade are facing extra feed bills now and well in to the future plus the additional costs of bringing the damaged pasture back in to production. This will clearly have a very significant impact on the finances of such farmers and that is not to mention the impact the flooding will have had on their own homes.
Therefore the new grant money will be an important boost to help the worst affected farmers get back on their feet but it will be, by no means, a panacea for all their troubles.
The money comes from the “Farm Recovery Fund” which was set up by DEFRA after Prince Charles and a succession of politicians, including David Cameron, visited Somerset to see the grim reality of what was happening for themselves.
DEFRA opened the fund on 28th February and initially have been taking bids for up to £5000 per farm, but from 28th April, farmers who have been particularly badly affected can apply for additional funding up to a total of £35,000 in total. This includes any money they have already been awarded under the initial bid process.
DEFRA secretary Owen Patterson re-visited the Levels on 15th April to see how farmers are recovering which is when he announced the second phase of the grant application to help farmers meet the costs “putting flooded farmland back in to production”.
James Winslade, who is the beef farmer whose cattle we saw so dramatically evacuated as the flood waters rapidly rose, engulfing his farm and the nearby village of Moorland, said, “It’s good that the government has acknowledged the scale of the problem. We have insurance but it mostly covers damage caused by fire and not floods. I will definitely apply for this additional grant money. Unless I apply for this grant I will not cope”.
What is clear is that although the weather has improved and superficially the grass looks as though it is growing, the land which was flooded to a significant depth for several months will not be productive for some time. This will not only impact on the availability of grazing for cattle which should be outside now, but it will impact on the amount of fodder which will be able to be conserved for next winter.
Thus farmers such as James Winslade are facing extra feed bills now and well in to the future plus the additional costs of bringing the damaged pasture back in to production. This will clearly have a very significant impact on the finances of such farmers and that is not to mention the impact the flooding will have had on their own homes.
Therefore the new grant money will be an important boost to help the worst affected farmers get back on their feet but it will be, by no means, a panacea for all their troubles.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
Tuesday, 18 March 2014
Legionella checks could be vital
Most people associate Legionnaires’ Disease with exotic climates or big hotels and conference or leisure centres.
But it can be much closer to home than you think - quite literally if you have a wet air conditioning system, swimming pool, or open water tanks in your property.
If the property is let, to comply with the Health and Safety Executive’s Code of Practice, landlords need to ensure that the risk of exposure to legionella in the property is properly controlled and where necessary carry out a risk assessment prior to letting.
Legionnaires’ Disease is the result of legionella bacteria infecting the lungs. It is usually contracted through breathing in small droplets of contaminated water. It is not contagious and cannot be spread directly from person to person.
Legionella bacteria is commonly found (often in harmlessly low numbers) in sources of water, such as rivers and lakes. However, the bacteria can rapidly multiply if they find their way into artificial water supply systems such as air conditioning.
Large buildings such as hotels, hospitals, museums and office blocks are more vulnerable to legionella contamination because they have larger, more complex water supply systems in which the bacteria can quickly spread. But with the increasing complexity of domestic properties, the threat should not be ignored.
Carter Jonas' heads of lettings and property managers have Legionnella and, Water Safety training and where they identify possible risk of Legionnaires’ Disease, will recommend an external consultant to carry out a risk assessment.
For more information visit The Health and Safety Executive’s Code of Practice.
Lisa Simon,
Partner
Head of Residential Lettings
T: 020 7518 3234
E: lisa.simon@carterjonas.co.uk
But it can be much closer to home than you think - quite literally if you have a wet air conditioning system, swimming pool, or open water tanks in your property.
If the property is let, to comply with the Health and Safety Executive’s Code of Practice, landlords need to ensure that the risk of exposure to legionella in the property is properly controlled and where necessary carry out a risk assessment prior to letting.
Legionnaires’ Disease is the result of legionella bacteria infecting the lungs. It is usually contracted through breathing in small droplets of contaminated water. It is not contagious and cannot be spread directly from person to person.
Legionella bacteria is commonly found (often in harmlessly low numbers) in sources of water, such as rivers and lakes. However, the bacteria can rapidly multiply if they find their way into artificial water supply systems such as air conditioning.
Large buildings such as hotels, hospitals, museums and office blocks are more vulnerable to legionella contamination because they have larger, more complex water supply systems in which the bacteria can quickly spread. But with the increasing complexity of domestic properties, the threat should not be ignored.
Carter Jonas' heads of lettings and property managers have Legionnella and, Water Safety training and where they identify possible risk of Legionnaires’ Disease, will recommend an external consultant to carry out a risk assessment.
For more information visit The Health and Safety Executive’s Code of Practice.
Lisa Simon,
Partner
Head of Residential Lettings
T: 020 7518 3234
E: lisa.simon@carterjonas.co.uk
Monday, 20 January 2014
Property Investors Return With Confidence
The year has been heralded as one in which investor confidence in property will return in earnest. Rural property peers have pointed to the ‘froth’ skimming off premium agricultural land values this year as property-minded investors return with more confidence to the more obvious residential and commercial sectors for the first time post-credit crunch.
But, in the commercial sector, it’s by no means the wholesale return of investor confidence in any commercial property opportunity and the smartest money is always ahead of the game in the smartest of locations.
Last summer, Cambridge greeted the news that Tesco Pension fund is backing developer Brookgate’s 65,000 sq ft Grade A building which is at the heart of the cb1 scheme. But this five storey building was already pre-let and pre-let in Cambridge is always going to be a sure-bet.
In places like Cambridge, where there are limited opportunities in a smattering of its remaining key strategic locations, funders have been prepared to invest on very specific terms for the past three years. The terms usually involve pre-let agreements, more often than not with blue-chip companies and with certainty of long term leases.
Given the limited and ever diminishing supply of commercial sites with viable opportunities in Cambridge, those which exist are big ticket items and so it’s the cream of the funders who are attracted here.
With forecasts that the development pipeline will be reduced by more than 25 per cent by the end of this year, there’s concern about future opportunities for commercial property investments.
Investors like to look ahead and stay ahead but it’s getting more and more difficult to point to the next tranche of Cambridge sites looking for funding. Land which is supposed to see the city through to 2030 is already coming in to the calculations and commercial allocation.
With so much current building activity in Cambridge, it’s difficult to convince a lay audience that there’s a paucity of sites in supply on the near horizon but it’s one we will have to face – and soon.
The year 2014 is going to be a big one for those with development and property interests here.
This year sees Cambridge City Council and South Cambridgeshire District Council’s Local Plans firming up with the identification of residential and commercial site allocations to take the area through the next couple of decades.
At the end of this month and in the early days of February, we welcome in the Chinese Year of the Horse. People born in years of the horse are believed to be active and energetic and, work wise, they refuse to give in to failure but, add the astrologers, ‘their endeavour cannot last indefinitely’.
In a twelve year zodiac cycle, the next year of the horse in 2026 - property investment funds are already backing Cambridge sites that are four years in front of that horse.
But, in the commercial sector, it’s by no means the wholesale return of investor confidence in any commercial property opportunity and the smartest money is always ahead of the game in the smartest of locations.
Last summer, Cambridge greeted the news that Tesco Pension fund is backing developer Brookgate’s 65,000 sq ft Grade A building which is at the heart of the cb1 scheme. But this five storey building was already pre-let and pre-let in Cambridge is always going to be a sure-bet.
In places like Cambridge, where there are limited opportunities in a smattering of its remaining key strategic locations, funders have been prepared to invest on very specific terms for the past three years. The terms usually involve pre-let agreements, more often than not with blue-chip companies and with certainty of long term leases.
Given the limited and ever diminishing supply of commercial sites with viable opportunities in Cambridge, those which exist are big ticket items and so it’s the cream of the funders who are attracted here.
With forecasts that the development pipeline will be reduced by more than 25 per cent by the end of this year, there’s concern about future opportunities for commercial property investments.
Investors like to look ahead and stay ahead but it’s getting more and more difficult to point to the next tranche of Cambridge sites looking for funding. Land which is supposed to see the city through to 2030 is already coming in to the calculations and commercial allocation.
With so much current building activity in Cambridge, it’s difficult to convince a lay audience that there’s a paucity of sites in supply on the near horizon but it’s one we will have to face – and soon.
The year 2014 is going to be a big one for those with development and property interests here.
This year sees Cambridge City Council and South Cambridgeshire District Council’s Local Plans firming up with the identification of residential and commercial site allocations to take the area through the next couple of decades.
At the end of this month and in the early days of February, we welcome in the Chinese Year of the Horse. People born in years of the horse are believed to be active and energetic and, work wise, they refuse to give in to failure but, add the astrologers, ‘their endeavour cannot last indefinitely’.
In a twelve year zodiac cycle, the next year of the horse in 2026 - property investment funds are already backing Cambridge sites that are four years in front of that horse.
Will Mooney MRICS
Partner
Commercial, Cambridge
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