Improve your credit score by paying your rent

The Big Issue has teamed up with credit score agency Experian to launch The Rental Exchange, a unique credit scoring system designed specifically for renters.

Letting agents or housing providers send the renters payment information to The Renal Exchange who in turn use the payment history of on time rental payments to build a credit score

The service cost nothing for tenants, landlords or agents to sign up to and is also tailored for people who pay their rent via housing benefit, who would normally have great difficulty in building up a credit history

The Rental exchange is designed primarily for agents and housing associations to upload payment data, however many private renters do not use an agent or rent through local authority or housing association, The Rental Exchange has thought of that.

Running parallel to The Rental Exchange is Credit Ladder this provides private renters with the same benefit of building up credit history.

The tenant pays Credit Ladder their rent directly, Credit Ladder then pay the landlord the same day and the on time payment history is used to build up a credit score.

In addition to this, the service also allows the renter to build up an online ID which will help when applying for credit, opening a bank account and even arrange a better utilities tariff, or qualify to pay for gas/electricity via a non-prepay tariff

As a private tenant I have personally signed up to credit ladder and as a portfolio manager for a homeless charity I am also signing up all of our tenants to The Rental Exchange to help them build a credit history.

http://www.experian.co.uk/rental-exchange.html

https://www.creditladder.co.uk/

Is this the start of the end for letting agents??

A London letting agent too a number of its landlords to court for failing to pay the agent its renewal fee..

The landlords had all rented their properties through the agent for a number of years, keeping the same tenants in situ throughout, on the 7th year renewal of the tenancy, the agent again charged its 6.5% renewal fee, despite no longer working for the landlords...the agents had not negotiated with tenants regarding the renewal, they did not manage the property nor did they collect rent, yet still felt entitled to the £1,123 commission per property

The agents brought the case relying solely on their signed T&Cs specifically paragraph 8

 “Renewal commission becomes due in full whether a renewal agreement is signed or not when all or one of the original tenants remains in occupation.  Commission is due whether or not the renewal is negotiated by the agents.”

However, at the hearing at Willesden County Court, the judge dismissed the claim on the basis that although the fees, terms and conditions document was signed by the landlords, the fact that the agents would claim the renewal commission whether or not they did any work was not flagged up on the first page of the document where the fee was mentioned.

John Miller, of Miller Clayton, which acted on behalf of the landlords said: “In my opinion, it is unreasonable and unfair for agents to charge a renewal commission at a percentage near to the percentage charged on the initial letting after the fourth year of renewal, especially if they had not carried out any work towards completion of the renewal terms.

“Even if they did, only a reasonable administration fee should be charged.”

source: https://news.rla.org.uk/victory-landlords-agents-renewal-commission/

Pitchforks at the ready…… Letting agency fees to be banned.

Yesterday, Chancellor Philip Hammond announced his Autumn statement for 2016 and since the moment he stated that Letting agency fees were to be banned the UK property industry has nearly done a Kim K and broken the internet.

The majority of industry articles covering this are up in arms claiming this is Draconian and will result in rents increasing to a point where no one will be able to afford to rent and the 19% of the UK population who currently private rent will be homeless and all letting agents will go out of business and private landlords will be left with empty properties

All very dramatic don’t you think…

A vast majority of lettings agents  currently “double dip” when it comes to fees, meaning they charge both the landlord and the tenant for the same job for example drawing up a tenancy agreement, which can cost anything between £50 - £500 not a bad days work from pressing the ‘print’ button on your computer

But lets look at the facts…. To start, the ban on fees will not happen over night, there will now have to be a consultation and a policy will need to be drawn up, that policy will need to be approved, this could take months

Secondly, in 2012 Scotland did exactly this and banned letting agents from charging tenants

The research carried out by Shelter and published a year later in 2014 called ‘End letting fees: Lessons from the Scottish lettings market’ Showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK.

Rents did appear to have risen more in Scotland than in other comparable parts of the UK in 2013; however, most of this rise is explained by economic factors and not related to the clarification of the law on letting fees.

Letting agencies in Scotland describe an extremely healthy private rental sector. All key business indicators showed very encouraging growth in the 12 months after the ban, driven mainly by increased tenant demand, possible due to the fact that tenants could now afford to rent because they saved not paying the high fees.

The majority (59%) of letting agency managers interviewed said that the clarification in the law on fees had had ‘no impact’ on their business, with only 24% saying it had a small negative effect. Not one agency manager interviewed said it had a large negative impact on their business, and 17% considered the change to be positive for their business

Less than one in five (17%) of letting agency managers said they had increased fees to landlords.

The majority (70%) of landlords in Scotland who use agents did not noticed any increase in fees since 2012. Only one landlord in 120 surveyed said they had noticed an increase in agency fees and had passed this on in full to their tenants.

So with these proven facts in place, I think we sound take comfort in assuming that rents will not see a huge rise and landlords will not see an increase in their costs, all this will mean is that agents will no longer be able to double dip

The Tenant Tax is Coming

What is Section 24

In the Summer budget 2016, George Osbourn announced the introduction of The Finance Act (No2) 2015, Section 24 of this act impacts ALL individual landlords who have mortgages will from April 2017  this will restrict mortgage interest expense deductions for private landlords to the basic rate of tax

The hugely important and Generally Accepted Accounting Principle (GAAP), where INCOME minus COSTS equals PROFIT, will no longer apply to individual buy-to-let landlords with finance costs.

put, Section 24 will mean that most landlords will have to pay extra tax of 20% or more of their annual mortgage interest and other finance costs. The tax they pay may be greater than their real profit, leaving them with a rental loss and a cash shortfall.

And it’s likely to move vast numbers of landlords into the higher rate tax bracket, while simultaneously losing them their tax credits and personal tax allowance.

On 6^th October 2016, Cherie Blair QC represented landlords in The Royal Courts of Justice to request the law be overturned

----The hearing failed

Landlords have already been hit this year by the removal of the annual wear and tear allowance, which allowed landlords to claim back the cost of items they had to replace in a furnished property

Impact on tenants

The impact will be devastating for the Private Rented Sector (PRS) The National Landlord Association estimates this law will impact over 314,000 landlords with an estimated 630,000 properties being effected.

Smith Williamson Specialist accountants have calculated that landlords would need to increase rents by at least 5% to counter the impact of S24

The increase in rents will effect all tenants, both employed and in receipt of benefits, however it is unlikely that tenants will be able to afford these increases. Those working will not see a wage increase

DWP Quarterly Benefits Summary - At August 2015, state there were 4.79 million recipients of Housing Benefit, of whom almost three-quarters were aged under 65. The average weekly amount of Housing Benefit was £95.30.

86.8% of the 1.53 million Private Sector Housing Benefit recipients were receiving the Local Housing Allowance.

All of these households have the potential to lose their homes because they will not be able to afford the expected rent increases.

Social Impact

Millions of people face the very real likelihood of being made homeless if rents are increased, the main reason for this is Housing Benefit will not be raised in line with this mass increase, Housing benefit or LHA is only calculated once a year on 15^th January by Valuations Office Agency VOA, these calculations are based on the 30^th percentile of rents in the Broad Rental Market Arear BRMA and the existing LHA rate.

Tenants who have their rent increased in April 2017, will not see an increase in their housing benefit until at least April 2018, resulting in many being evicted for rent arrears, an issue that will bring its own problems as tenants will find their credit impacted as will as having a ‘black mark’ against them for leaving a previous property in arrears

Although this new regulation does not effect landlords who do not have a mortgage or are incorporated in someway, it is extremely unlikely that these landlords will be happy to sit back an accept lower market rents while others enjoy increases, the obvious knock on effect is all landlords will increase rents to set a new high market rate, which will be completely unaffordable to most, even if they are in full time employment.

This will result in many homes sitting empty it has priced people out of the market and a huge increase in homelessness.

So what is the answer?

If only it was that simple… the sensible thing to happen would be to bring S24 in to force in April 2017 but only for New BTL properties from that date on, this way landlords can go into buying a property with all the facts and their eyes open.

At present, many existing landlords will be blindsided by this new legislation and in fact could risk losing their own homes as their personal mortgage may rely on rental income and a huge tax bill could push many owners into debt.

Countrywide says buy to let purchases now at a six year low

In the three months after the introduction of the three per cent stamp duty surcharge on April 1, landlord purchases accounted for only eight per cent of all homes bought - the lowest proportion since 2010.


This comes following the surge in activity in the first quarter of the year, where landlords accounted for 18 per cent of home buyers, the highest proportion seen since 2010.


The largest change in landlord activity was in the North, Midlands and Wales.


In the North East, after 29 per cent of homes sold were bought by landlords in the first quarter of 2016, this plummetted to nine per cent in the second quarter.


Similarly, in Wales and the East Midlands, this fell from 19 per cent to three per cent and 22 per cent to eight per cent respectively.

The increased purchase activity from landlords at the start of 2016 has led to the number of homes available to rent increasing by 22 per cent in June compared to last year.

London and the South West have seen the largest growth in homes available to rent, the number rising by 33 per cent and 55 per cent respectively.

Increasing supply, as well as affordability barriers, has reduced the rate of rental growth with most regions seeing slower growth rates throughout the year.

The average rent across Britain rose to £960 in June, 3.6 per cent higher than last year.

“The lull in landlord activity is mostly due to investors bringing forward purchases in the first three months of the year but upcoming changes to mortgage tax relief and the prospect of heightened uncertainty in economy during the lead up to the referendum, will also have made investors warier of entering the market” says Johnny Morris, research director at Countrywide.

“Those extra homes bought by landlords at the start of the year are still making their way to market. Despite tenant numbers still growing, the increased supply is slowing rental growth.”

source https://www.lettingagenttoday.co.uk/breaking-news/2016/7/countrywide-says-buy-to-let-purchases-now-at-a-six-year-low

Landlords avoiding benefits tenants due to Osborne's tax changes

Landlords are looking to house tenants less likely to miss rental payments in order to minimise the impact of a number of tax changes to the Private Rented Sector (PRS).

According to a survey by the National Landlords Association (NLA), this means that tenants on benefits could miss out on rental homes as they are typically viewed as 'riskier'.

Some 60% of landlords surveyed by the trade body said that the Chancellor's decision to restrict buy-to-let mortgage interest to the basic rate of income tax from 2017 will reduce their profitability.

In order to make sure all costs are covered, 20% of those landlords who'll be affected told the NLA that they feel they'll need to prioritise other tenant types over perceived 'riskier' tenants.

In the last year, 64% of landlords with tenants in receipt of housing benefit experienced rent arrears, according to the NLA.

It also claims that just 20% of landlords let to benefits tenants in the first quarter of 2016, down from 36% in Q1 2012.

“Many of those who once would have expected to live in social housing now have to compete for private homes with other types of tenants," says Richard Lambert, chief executive of the NLA.

"It’s a real concern because a significant proportion of landlords already choose not to let to tenants who receive benefits because the perception is they are too risky. Rightly or wrongly, young professionals or working families are seen as more likely to be better payers and less hassle to manage."

He says a perfect storm of tax changes and the diminishing availability of social housing could mean some tenants struggle to find any housing at all.

https://www.lettingagenttoday.co.uk/breaking-news/2016/5/landlords-avoiding-benefits-tenants-due-to-osbornes-tax-changes

Why not-for-profit letting agencies are the RightMove for landlords

We have all seen the shocking headlines and watched the “tell all” TV programmes portraying all Benefit claimants as potential 2 legged property wrecking scroungers with no intention of paying rent

Sadly when scenes like this are drip fed into our living rooms and breakfast tables we can be forgiven for thinking this is the norm rather than the exception.

It is estimated that over 80,000 of the poorest families in Britain are finding it increasingly difficult to find suitable accommodation because Landlords have been scared off this section of society convinced they will not pay their rent, they will cause damage and disruption to the property and neighbours , so choose instead the “safe” option of renting to tenants in full time employment – but as we all know in this current unsteady climate we can all face the possibility of redundancy or the liquidation of the company we work for.

Centre of Social Justice Director Philippa Stroud commented: “We understand that for most the era of a guaranteed social sector house for life is over. However, we must make the private rented sector work better for low-income families. Currently, the instability caused by not knowing how long a tenancy will last has a huge impact on children’s education and on parents’ ability to retain a job. -

And as all landlords know, once the rent stops being paid, it is a very expensive and stressful few months before your once ‘perfect’ tenant is evicted by the bailiff and it is unlikely that you will see the rent that’s owed to you.

Letting agents charge on average between 14%-20% to manage your property on top of this there maybe additional costs for set up, admin fees, additional property inspections to name but a few

From This...........

 To This.........

So what is the way forward?

Social lettings agents are not-for-profit so have no big over heads to cover we don’t advertise on all the big portals and we have the tenants vetted and ready to move in so you have no void period.

The main benefit of social letting agents is the Rent Guarantee lease option which pays you an agreed rental every month even if we don’t receive the rent. Social lettings agents will also cover maintenance costs and with no renewal fees or added hidden extras the savings just keep coming.

DENs Rent Aid is the Social letting agent for Dacorum in Hertfordshire, assisting people who for many reasons such as, breakdown of relationship, loss of job, or family and friends no longer able to accommodate them, it is not just those with additions or previous rent arrears that find themselves homeless it really can happen to any one of us.

Social lettings staff are not letting negotiators or deal closers, they are trained support works with social work and counselling backgrounds who can not only find housing but also get people off benefits and into work with training and education, they will also work with tenants to help resolve problems such as drink and drug addiction, with weekly support meeting and housing benefit paid directly to the agent they ensure we have already firmly shut the gate before the horse has considered bolting.

We are always looking for property to rent and offer full management at ONLY 8% with no added extras, you will receive your rent each month in full and on time and we will look after the maintenance for your too.

If you have a property and would like more information on what we do and how it will benefit you are a landlord please call Julie Ford on 01442 253 923 or email Julie.ford@dens.org.uk