Posts Tagged ‘rent’

Rental Arrears – What should you do?

Tuesday, February 19th, 2013

I occasionally get asked, “What if the tenants fail to pay rent and what therefore would be the process for evicting tenants in rental arrears”, I quickly point out the importance of tenant referencing and the possibility of taking out a rent protection insurance policy to protect them in the event that this happened. Many landlords incorrectly assume that the process of evicting problematic tenants is quick and inexpensive. Below are a few key facts on the usual process of eviction and court proceedings when issuing a section 8 notice under the housing act;

If a tenant breaches their tenancy agreement by not paying their rent, the landlord can serve a section 8 notice under the Housing Act 1988. The relevant grounds to be cited are 8, 10, 11, contained in schedule 2 of the Act.

After serving the section 8 notice on all or any of these grounds, the landlord must wait 14 days before perusing court action, during which time the tenant has the opportunity to remedy the breaches as alleged.

Ground 8 is mandatory; this means the court must order the possession back to the landlord if the ground subsists. To establish this ground, the tenant must be two months in arrears if the rent is due monthly, both at the date of the service of the notice and the date of the hearting.

Grounds 10 and 11 are discretionary; the judge decides whether or not to grant possession back to the landlord. It is generally not advisable to use these grounds alone to seek possession. At the expiration of the section 8 notice, the landlord can issue court proceedings using forms N5 and N119 available from www.hmcourts-service.gov.uk

One of the most common reasons for such forms to be rejected by the courts is because the agents have signed them when only the landlord (claimant) or the landlord’s solicitor is permitted to do so. Once proceedings have been initiated, the hearing date is commonly around 4-8 weeks later.

Assuming that a possession order has been granted, the court can permit a tenant to stay at the property for up to 6 weeks, although this is usually 2 weeks unless the tenant can establish that this would cause exceptional hardship.

If the tenant does not leave on the date contained in the court order, the landlord will need to seek a warranty for possession (N325) from the court and pay these additional costs.

Source: Guild of Letting & Management

Chris Lakin
Lettings Director

Rent rises drive strong buy-to-let yields

Monday, March 26th, 2012

A 4.8% growth in the average monthly rent led buy-to-let investors across the UK to achieve a rental yield of 6.1% in 2011, according to new figures from BM Solutions.

Strong demand for rental properties increased further last year, with the average monthly rent climbing to £716 in 2011 from £682 in 2010 as a result.

BM Solutions reported that while 2011 rental yields were marginally lower than the previous year (6.2%), they remained buoyed by continued rental increases across the UK. Regionally, the highest rental yields in 2011 were in the North (7.0%), North West, Yorkshire and the Humber (both 6.3%), Wales (6.0%), West Midlands and the East Midlands (both 5.9%). Greater London (4.8%), South West (5.0%), South East (5.2%) and East Anglia (5.3%) all registered yields below the UK average.

Phil Rickards of BM Solutions said: “There is a very healthy demand for rental properties across the UK right now, which in part may be driven by the costs associated with buying a home: costs which, for some, will only increase as the stamp duty holiday comes to an end. Average gross yields on a buy-to-let property have been just over six per cent for the past two years, driven by growth in rental values.

“However, with house prices likely to remain broadly flat again this year, buy-to-let landlords can again expect little capital gain on their investment in 2012.”

While the national average monthly rent increased by 4.8% overall, there are more significant gains in regional areas. The largest increases were in East Anglia (8.0%) and the North (6.9%). The South East and Greater London recorded rises of 5.8% and 5.6% respectively. In contrast, rents increased by less than 1% in Wales (0.1%) and Scotland (0.7%).

The average rent in Greater London remains significantly higher than elsewhere in the UK, at £1,212 per month. The average monthly rent in the capital is 69% higher than UK average of £716 and 41% above that in the South East (£858) – the next highest region. The lowest average rents are in Wales (£474 per month), the North and Yorkshire and the Humber (both £488 per month).

First ever rent rises in January; Tenant arrears at 10.7%

Friday, February 17th, 2012

The rental market sprang back into life early this year, increasing 0.1% to £712 per month and the first rise in three months.

However, rental arrears hit a high of 10.7%, reflecting the poor economic backdrop.

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Annual rental inflation increased to 4.3% from 4% in December, a £30 rise in the average monthly rent in the past year, according to figures from LSL Property Services.

Rents rose the fastest on a monthly basis in the West Midlands and South West, where they increased by 1.8% and 1.5% respectively.

In London, rents rose by 0.8%, where they have only fallen once in the past 13 months. However, rents fell in four regions, with the biggest declines in the East of England and Wales, where they fell by 1.7% and 1.5% respectively.

London recorded the highest annual rental rises at 6.3%, followed by the East of England where rents rose by 5.9%, but fell in the North East by 0.7%

David Brown, commercial director of LSL Property Services, said the depth of the underlying demand for tenancies over Christmas brought greater competition for rental property and halted the usual downward pressure on rents.

“In January, activity has already moved up a gear in many parts of the UK, pushing rents up once more in a small, but significant rise,” said Brown.

“Mortgage lending has shown signs of improving in recent months, but transactions remain at almost half their historic levels, and the increasing dependency on rental accommodation will drive further rent rises over the long-term.”

London hit by huge rent hikes

Wednesday, December 14th, 2011

According to the report, a buoyant year for the lettings market has seen rents in London reach record levels and the average price now stands at £875 per week. Canary Wharf recorded the strongest rental growth, with rents for one-bed flats increasing 25 per cent in the past nine months, while Putney and Kensington also saw strong growth with prices for two-bedroom apartments increasing 12.5 per cent. The most expensive place to rent is Knightsbridge and Belgravia, where average rents are £3,300 per week.

With price increases akin to those experienced by the sales market during the pre-2007 ‘boom’ years, many renters are now facing affordability issues similar to those faced by first-time buyers. This has prompted a rise in the number of flatshares across the capital and is increasingly causing renters to compromise on location, budget or the property itself.

Nick Barnes (left), Chesterton Humberts’ head of research, says: “With people struggling to secure mortgages and the average age of the first time buyer now 38, we are definitely seeing the expansion of the rental market but it is clear that stock levels are failing to keep pace with the increased demand, especially in the prime locations. This is putting an upward pressure on rental prices and causing affordability issues across the capital.”

Richard Davies(right), head of lettings at Chesterton Humberts’, adds: “This has been an incredibly strong year for our lettings department, driven in part by the increased demand from forced renters or would-be buyers.”

Rentman softwareGoing forward into 2012, Chesterton Humberts is predicting that the flat housing market, low availability of quality stock and continued demand from renters will see another year of rental price increases. This situation is likely to be exacerbated in the short-term by the Olympic Games, as demand from visitors for temporary accommodation is expected to put further pressure on the already limited stock levels.

Against a back-drop of economic uncertainty in Europe and volatility in the equities market, the continued strength of the lettings market is attracting an increasing number of buy-to-let investors. Evidence of this can be seen from the latest figures from CML which show that the number of buy-to-let mortgages acquired increased by 16 per cent in the third quarter of the year – the highest levels seen since 2008.

Demand for rented accommodation will create opportunity for investors in 2012

Friday, December 2nd, 2011

Caroline Kavanagh, Group Lettings Director of Townends estate agent part of the Badger Holdings Group, comments on the year that has been and gives her predictions for the residential lettings market in 2012.

She said:

“Much the same as last year, high demand and low supply has been the ‘theme’ of 2011, causing rents to rise by an average 20 percent across London and the South East.

“In some areas such as Putney, rises have been nearly double this average, with a two bedroom apartment in a sought after location rising from £1300 per calendar month (pcm) this time last year, to nearly £1800pcm today, a 38 percent increase.

“It is easy to see why rent rises have accelerated so quickly when you consider that while there have been some new investors and accidental landlords providing additional opportunities for tenants, this has not been nearly enough to satisfy the demand from the 15-30 percent rise in applicants versus this time last year, and a staggering 44 percent increase since 2009.

“What has been apparent to agents as the rental market has grown, are the high expectations from both tenants and landlords.

“Some landlords expect to achieve maximum rent for their property regardless of location or condition but also want to secure the best quality tenant. As many tenants have had to succumb to higher rents, in return, they expect to be getting more ‘property for their pound’.

“The fact is that it is not possible for rents to continue rising at the rate they have been next year, as this is not sustainable and tenants will simply be forced out or will take a more stubborn approach of “can’t pay, won’t pay”.

“We have already seen instances of this with some tenants looking at alternatives in order to avoid higher costs, be that moving back with parents, downsizing to a smaller rental property or opting to share with others.

“Despite this, I believe demand will remain strong and peripheral areas of prime locations will start to benefit from the overspill of tenants in need of more affordable accommodation, which in turn will provide even greater investment opportunities for landlords to expand their portfolios.

“Mortgage finance has eased within the buy to let market and this has provided those wishing to invest with greater opportunity.

“A modest number of new landlords have started dipping their toes in the market but there is plenty of demand for more and as other investment options continue to give little in return, property will become an increasingly attractive proposition and a more viable long term investment for many.

“Heading into 2012, demand will almost certainly continue to outstrip supply.

“However, with signs that rents are stabilising, next year is likely to be more balanced, meaning landlords will have to be more realistic, perhaps weighing up the pros and cons of keeping a current and reliable tenant but accepting that the rental income will remain the same, versus facing the open market in a bid to secure a tenant possibly willing to pay more.

“Reports out suggest many landlords are looking to grow their portfolios in 2012.

“Despite developments, there is an incessant need for the banks to free up more mortgage products to assist these ‘would be’ investors and ensure the private rented sector can withstand continued demand, which ultimately will also help the economy.”

Rent rises accelerate

Friday, September 16th, 2011

Rents recorded their largest monthly increase in a year in August, according to the latest Buy-to-Let Index from LSL Property Services.

In August, the average rent in England and Wales rose by 1.2% to £713 per month, surpassing the previous record high of £705 in July. This is the largest monthly increase since August 2010. With annual inflation at 4%, the average rent is £27 pcm higher than August 2010. The average yield was 5.2% in August.

On a monthly basis, rents increased fastest in Wales and the South East, where they rose by 2.1%. The next biggest increases were in London and the South West, where they rose by 1.5% and 1.3% respectively. Rents only declined in the Midlands compared to July, falling by 0.4% in both the West Midlands and the East Midlands.

In the last year, London has seen stronger rental inflation than other regions of England and Wales, with rents hitting a new record high of £1,025 per month in August. This is an annual growth of 6.6% – equivalent to £63 per month. The next biggest annual increases were in the West Midlands, where they rose 6% and the North East, where they increased by 4.3%. In the last year, average rents have risen in all regions except Yorkshire and the Humber, where they have fallen by 0.5%

David Brown, commercial director of LSL Property Services, said: “We are in the thick of the busiest time of year for the rental market, and red-hot demand for properties is driving rents up at their fastest monthly pace in the last 12 months. Recent graduates moving for their first jobs have further exaggerated the long-term and growing demand from frustrated buyers. In the last two years, average rents have risen by more than £50 a month.

“With significant improvement in the number of buyers able to secure a mortgage unlikely in the foreseeable future, competition for rental accommodation will not drop and further rent rises remain on the cards.”

LSL said that the total annual returns on a rental property improved in August after annual decreases in property prices slowed. The average total annual return in August was 2.6%, the equivalent of £4,336 – £7,626 in rent, with a capital loss of £3,290. If property values maintain the same trend as the last three months, a property investor could expect to make a total annual return of 10.5% over the next 12 months – equivalent to £17,381 per property, LSL said.

Brown said: “Total annual returns took a turn for the better in August, following an uptick in rental property values in the past few months. However for landlords able to invest in London, the returns are looking even stronger. With house prices in the capital outperforming the rest of the UK, the average London landlord would have made an annual total return of nearly £15,000 in August.

“Nevertheless, it is rental income and yields that are tempting new property investors to the market, rather than thoughts of immediate capital gains. In fact, yields on rental properties are much stronger than in many other types of investment. With these fundamentals looking so attractive for long-term investment strategies, a sustained increase in buy-to-let lending would help meet the growing demand from would-be investors – and allow the sector to expand to match the increasing demand from would-be buyers.

However, tenant arrears increased for the first time since April, with 10.7% of all UK rent unpaid or late by the end of August – up from the 9% of rent unpaid or late in July. Unpaid rent totalled £300 million across the UK in August, up 19.5% from the £251 million unpaid in the previous month.

Brown said: “The holiday season often takes its toll on tenant arrears, with many households squeezed by summer holiday spending. While we expect arrears to fall back into line in the short-term, the growth is indicative of the mounting pressure facing tenants. With rents rising so quickly, soaring inflation and an uncertain economic outlook, over the long-term we anticipate that rental arrears will become a growing financial problem for landlords.”

Twice number of people rent than own home

Wednesday, September 7th, 2011

Twice the number of people in the UK are renting (45%) rather than owning their own home (23%), according to new figures from specialist letting agents’ service provider Endsleigh.

The data, which also ranks the top ten regions in the UK for renting shows that Middlesex is the most popular area, with over three times as many renters (51%) than buyers (16%). It is closely followed by East Sussex (48%), Surrey (46%) and Berkshire (46%). Six of the top ten regions are in the South East of England, and all of the top ten are in the Southern part of the UK.

Despite 92% of renters ranging between 16 and 50 years old, and having different needs and wants from their property, all ages said they liked the flexibility of renting because there was more freedom to move between areas and into different types of accommodation.

More than half of renters surveyed are living in a property that is in a totally different location from their previous accommodation. With a greater amount of properties now available to rent due to property prices being lower than before, many believe they can also get more for their money by renting.

Unfurnished properties take preference over furnished homes, giving tenants the opportunity to add their own personal touch through furnishing their accommodation.

In spite of ongoing concerns about the UK economy, job market, and residential property sector, Endsleigh also found that three out of five renters intend to buy a property within the next five years.

Carlos Thompson, Endsleigh’s Head of Business Development, said: “The impact of the recession on the value of properties has meant that some home-owners have opted to rent rather than sell, consequently increasing the amount of supply in the lettings market. More choice and flexibility on the area and type of accommodation available is good news for some tenants. However, whilst more properties means more choice, the surge in renting means there can be fierce competition in applying for a property, and there is a real risk that tenants will stretch beyond their means and choose somewhere that they wouldn’t normally, just to secure a property.

“The opportunity to capitalise on a lucrative rental market has also led to a rise in competition between letting agents as they all look to fill their books with landlords’ properties. Therefore it’s more important than ever for agents to offer a first-class service that includes comprehensive reference checks and rent guarantee insurance, which will not only protect landlords from overstretched tenants who might default on their payments, but will distinguish them from their agent competitors.”

Rents grow faster than sale prices

Thursday, May 12th, 2011

The cost of market entry for first time owner-occupiers is preventing many from buying and so is boosting demand for rental property., say Savills.

A dearth of rental stock in many locations is pushing up rents and future prospects for rental growth are very strong say Savills researchers, who forecast that the private rented sector will account for one in five of all households by the end of 2016.

Mainstream rental growth has been particularly pronounced in Greater London where average residential rents rose by 16 per cent in 2010.The prime rentals market is also seeing strong price growth.

Average prime London rents increased by 3.4 per cent in the first 3 months of 2011 and by almost 12 per cent in the past twelve months, latest analysis of the Savills prime London rentals index shows.

This growth shows no signs of slowing, and outpaces the 2.8% growth seen in Q1 2011 of the underlying value of properties according to latest analysis from property advisor, Savills.

Yolande Barnes, head of Savills residential research, said:

“This value dynamic will push out yields and attract investor interest, and there is clear evidence that investor buyers are already emerging from the shadows.”

Corporate demand and City cash boost rents in North and East London

Central London rents are traditionally driven by demand from corporate tenants from overseas which focuses on the high value prime areas and which has been on the increase since the recovery in the financial and business services sector in 2009.

Boosted demand, coupled with fewer frustrated sellers or ‘accidental landlords’ providing supply into the market following two strong selling seasons, means that rents have risen since the beginning of 2010 and steeply in 2011.

Price growth has been particularly pronounced in locations where renewed City confidence has translated into boosted demand for good rental property, both from domestic and international tenants.

This has especially benefited prime East London (Wapping and Canary Wharf) with rents up 4.3 per cent in the quarter and 13.4 percent year on year and North London (Islington and Hampstead) where an uplift of 3.6 per cent in the quarter and 16.1 per cent year on year has left values some 15 per cent above their former peak levels. Much of this growth is due in no small part to low levels of good prime stock.

Prime central London values have also risen- albeit less sharply. Average values rose by 2.9 per cent in the quarter and by just under 6 per cent in the course of the last year, so remain 4.5 per cent below peak levels.

Exceptions are St John’s Wood and Regent’s Park where annual growth has passed 10 per cent in the quarter and values are now some 15 per cent above their 2007 peak, though transaction volumes are extremely thin.

Yields boost forecast

During the downturn, rental growth continued to the middle of 2008, raising rental yields slightly against the, then falling, capital values. Average prime central London yields moved out from 3.6% in December 2007 to 4% in December 2008.

After this, as capital values rose while rents were still falling, yields stabilised then started to move in again to 3.7%. Savills expects yields to move out slowly again as the rate of rental growth exceeds capital growth during 2011.

Overall, Savills market strength indicator for the prime London rental market remains positive. Constrained supply continues to be an issue although stock shortages have eased in the central area (perhaps explaining the relatively slower growth in prime central London).

More investor landlords have been seen bringing new investment properties to the rental market, which will boost prime central London stock levels in key locations such as Mayfair.

Yolande Barnes, comments:

“In November 2010 we stated that the outlook for well-located private rented stock was good. The rises seen so far this year support our forecast for 8.0 per cent growth this year in prime London.”

Southwest London to outpace the rest

Our all prime London market strength indicators point to continued rental growth in 2011 although the rate of growth may slow in some markets. The highest rental growth this year is expected in prime southwest London (Fulham, Putney, Wandsworth, Richmond) as stock levels here are particularly low and demand high.

Barnes, says:

High rent rises are not confined to the prime market and, as more aspiring buyers are frozen out of home ownership, demand for private rented stock in the country as a whole can only grow. Our prognosis for the private rented sector as a whole remains extremely bullish.”

Jane Ingram, Head of Lettings at Savills summarises:

“London continues to have the international draw; we therefore don’t foresee that stock levels in the rentals market are going to change due to a continued demand from overseas tenants. We may see slightly more stock come to the market as those landlords who aren’t living here full time choose to rent out their properties.”

Rent Arrears The Main Cause Of Possessions

Tuesday, August 17th, 2010

Research published by the National Landlords Association (NLA) suggests that 47% of possessions by landlords are due to tenants not paying their rent.

Although one-third of landlords had never sought to end a tenancy, the survey found 23.3% of had because of “anti-social behaviour” by tenants.

Landlords reported in 57% of possession cases the tenants took less than three months to move out, while 81% of cases were resolved within five months.

This follows recent data released by the NLA showing a fifth of private-residential landlords had tenants in rent arrears during Q2 2010.

David Salusbury (pictured), chairman of the NLA, said: “Gaining possession can be very costly for landlords, especially when it is related to rental arrears. Many landlords have mortgages to pay on top of the expense of gaining possession. One-third of landlords have reported paying between £250 and £1,000 to have tenants removed. This amount is often compounded by late rent payments.”

Tenants Face More Rent Rises As Stock Falls Further

Wednesday, July 7th, 2010

“The new budget may lead many to consider delaying their first steps onto the property ladder and, as more people rent, this will put more pressure on the lettings sector.

“A small number of properties came on the market during the second quarter but overall stock levels are still down. Demand is likely to outstrip supply for a while yet and rents will keep being pushed up as a result.”
Nigel Lewis, Head of Content Findaproperty

• Asking rents have risen 2.3% since the end of Q1 from £820pcm in March to £839pcm in June

• Stock levels have fallen in Q2 compared to Q1 of 2010 – the number of rental properties available on the market in June is 2.7% lower than in March

• Rental yields have increased from 4.53% in March to 4.57% in June

• Rents sought by landlords are now £16pcm higher than a year ago