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TODAY'S OTHER NEWS

BTL landlords ‘are now treading very carefully’ due to the tenant evictions ban

New landlord instructions were broadly flat last month following a modest increase in July, while tenant demand continues to increase sharply, according to the latest report from the RICS. 

The study also found that rental growth expectations over the near term have now strengthened in each of the past three months, with a net balance of 31% of contributors now anticipating an increase, up from 22% in July.

James Forrester, managing director of Barrows and Forrester, said: “Although well-intentioned, the ban on tenant evictions imposed and extended by the government has effectively left landlords to prop up the rental sector. 

“The ironic consequence is that landlords are now treading very carefully. As a result, stock entering the market remains flat while demand from tenants who can pay their way continues to increase.”

With demand for rental homes outstripping supply, this further imbalance is likely to result in rental prices increasing, potentially causing even more tenants to find themselves in financial difficulty, according to Forrester. 

He continued: “It’s important to remember that most landlords are individuals, not corporate giants. Having received little support, they are now struggling while shouldering the burden of a Government that once again seems hell-bent on persecuting the property-owning class.

“Until more is done to aid them through this challenging phase, who can blame them for sitting on the sideline rather than risking months of potential lost income and laborious court proceedings.”

  • Jill Boardman

    My house is sold subject to contract, my tenant is out of contract as of May 2020, agreed to stay until October 2020, knows the property is sold.
    My property management‘Purplebricks’ agreed a months notice either way with my tenant, they agreed this I think verbally, what do i need to do to get them to vacate for the buyer to move in?

    Matthew Payne

    You need to provide vacant possession on exchange ideally, the buyers lawyer will likely insist on it assuming a Resi purchase, so a correct s21 notice provided in writing to accomodate that, but as I assume you have missed the 29 August cut off, you now need to provide 6 months notice. You had better hope the tenant is happy to honour the verbal 1 month and move out. If they do then great, if not you are stuck with them until at least March 2021 unless they choose to leave before then. I would start with a call to your tenant to "update" them and check they are still ok for an October move date and see what they say, and I would definately take PB out of the loop completely.

     
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    If a property becomes empty it might be wise not to relet it until this eviction ban ends, better an empty property than one with a feckless tenant in it at the present time.

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    I agree. We found new tenants for a flat of ours then decided it's better to leave it empty for now as we already have one tenant in massive arrears on another house and are awaiting baliffs to resume.

     
  • Paul Barrett

    Vacant possession has a value all of it's own.


    Remember an AST can be for 1 day.
    But once issued a LL CANNOT apply for a PO for 6 months.
    Which is why most LL issue 6 month AST.
    Ensure you visit the property and ideally stay there once a week at least.
    Be your own property guardian.

  • Neil Moores

    In answer to Jill's question. You ask the tenant to leave and hope that he/she does. If you have not given the tenant formal notice already then you will have to give 6 months' notice or hope that your tenant plays ball.
    I would not start a tenancy with anyone at present where there is a deadline that is important to me, for vacant possession.

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    S21 date coming up,tenant says can't find anywhere to move to,and is therefore staying put.
    1) can we at least put the rent up-it is low at present?
    2) can we tell tenant we will seek a PO next year and court will award us costs?
    3) can we tell tenant we will not give them a reference,tbey will have a CCJ, and then be at the mercy of council accommodation?

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    Tell them all of that, and also tell them you will renew the CCJ every 6 years if they don't pay that!!!!!

    Even tell them you'll get the boys round..... :-)

     
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    Scare them as much as you possibly can.
    Try the one about the enormous rent hike at the end of the tenancy - So they better prepare to leave NOW!

     
    Matthew Payne

    1) you can try by serving a S13 notice assuming the fixed term is over, but if they feel its too high and refuse to pay it, there isnt much you can do until a tribunal is heard - won't be any time soon. If they are just refusing to leave, but are still going to pay the rent, you may want to let sleeping dogs lie, S13s are sometimes seen as confrontational, as rent increases should normally be agreeable bewteen parties without one. Devil always in the detail, you will have to judge.
    2) you can tell them of your intentions, I wouldnt pre-empt what a Court may award though. You have to consider when to serve a S21 notice first though if you havent already done so. (dont know whether your reference means you served it or not and it has expired)
    3) You can tell them you wont provide a reference. I wouldnt tell them they will have a CCJ, as you don't know one will be awarded, instead tell them if you are making an application to the SCC and a CCJ is a possible outcome. Again, speculation as to whether she will need social housing, so would avoid. Stick to the facts, they may well record all details of any mud slinging which won't look good for you in Court.

     
  • Mark Wilson

    Isn't the take away from this not to borrow to speculate as losses compound?

    Paul Barrett

    No Mark what we take from this is the calculated risk has changed.

    I very much doubt the OP considered CV19 and an eviction ban.

    I'm afraid like any business events can conspire against a 'normality!'

    I would imagine that from now on sensible LL will consider the now additional risk of CV19 type events and future eviction bans.

    There is now a new business paradigm as far as residential letting property is concerned.

    LL who now do not factor these circumstances into their risk calculation would deserve everything that happens to them.

    I suggest per tenancy a LL should have 2 years of mortgage payments available as liquid funds to cover for a feckless tenant and a future eviction ban.

    For most LL this simply wouldn't be achievable as such funds would be a deposit amount.

    But if LL invest not calculating the eviction ban risk then that would be their lookout.

    For many LL it simply wouldn't be worthwhile risking investing with a BTL mortgage.

    All BUSINESS is a calculated risk NOT speculation.

    There will be many LL that get this calculation wrong.

    That is the nature of business.
    Survival of the fittest!

     
    Mark Wilson

    So yields should rise? Are they? If they are is that short lived?

    Your reply reads in part that are agreeing with me.

    When you factor in 'added risk' how much gearing can your BTL speculation tolerate seems to be what you are saying. 2 years mortgage payments as cover is what you say. OK on the down side and whats the upside? Is that worth gearing?

     
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    I'm not good enough at maths or accountancy to work out my yield but I risked (or invested) £6000 deposit in buying a £60,000 flat which I rented out trouble free for the same £600 per month ( and only one change of tenant) for about 15 years. The last 10 years has seen the rent grow to over £1300 per month and it's now worth about four times what I paid for it.

    I utilised the early healthy capital growth to remortgage and put the released funds as a 10% deposit on other flats. I now have a £4 million portfolio with over £3 million equity and around £250,000 gross annual rent.

    You could argue that yield is all from the initial £6000 investment - so that's a yield of over 4000 %. Like I said my maths and accountancy knowledge isn't good enough to work it out. All I know is I have always been wealthier than any accountant I have used for the last 20 years.

    My message is: Invest for the long term and the yields will always grow as so many people want it all now - fancy cars, holidays, costa lot coffees etc. They will never be wealthy but the more astute and patient investors will continue to prosper by surfing on their indolence and ignorance.

     
  • Paul Barrett

    I do consider and essentially agree with you that the calculated risk is now far too risky even with exceptional yields.

    If a LL cannot obtain RGI then the reserves required to cover for just ONE feckless rent defaulting tenant are massive when you you consider it could easily be 2 years before a tenant could be evicted.

    It is because of the current and probably future inability to get rid of rent defaulting tenants that cause me to decide to eventually leave the AST PRS.

    I simply do not have the enormous reserves that would be required to manage the outrageous Govt actions on preventing eviction.

    Only by a whisker have I not been bankrupted by these outrageous Govt policies.

    For me no amount of yield would ensure my survival in the event of rent defaulting tenants none of whom apart from one have I ever been able to achieve RGI on.

    The calculated risk goalposts have changed and I have determined the risk is simply too much to bear.

    This is nothing to do with the intrinsic viability of the business model.
    It is simply by Govt preventing evictions renders the business model unviable.
    There are other adjustments to the repossession process coming soon which make the situation even more difficult.

    Not being able to have a quick chance of replacing a rent defaulting tenant with a rent paying one renders the whole BTL business model unviable.

    It was bad enough before when my 5 evictions took an average of 10 months to achieve but now it is simply ridiculous.

    So I do contend that in light of all these circumstances the leveraged rental business model is very risky unless you have very deep pockets to cope with the even more dysfunctional eviction process.

    Those who do not have substantial reserves to cope with the dysfunctional eviction process quite frankly shouldn't be investing via BTL.

    LL have to get tenant selection correct EVERYTIME!!

    When NOT if it goes wrong they will be faced with massive costs if RGI is unachievable.

    So I believe as you suggest that the leveraged letting business model is now too risky for any reasonable calculation to be made.


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    I rent out my house (moved in with my partner four years ago), never intended it to be a business but got a tenant so that I could continue paying the mortgage. Relationship has now failed and I've been asked to move out. I instructed my letting agent to issue Section 21 eviction notice end of July which they did and gave him three months notice. This was due to end 17th October. I have now found out purely by chance that my letting agent has been lying to me in communications, and they messed up the eviction notice so that it wasn't compliant. They have now re-issued it but obviously now have to give 6 months notice. I will now be homeless from 17th October and my tenant is now refusing to move out without a court hearing. I'm screwed basically. I can't sue my letting agent for incompetence because I can't afford it and I can't do anything about getting my house back. Any suggestions from anyone?

    Matthew Payne

    Hi Sue, depending on the amount of your proposed claim, the small claims court channel is designed to be affordable if you represent yourself, and you quite often find that if the LA know they are at fault, it will force them to make an out ouf Court settlement just to make it go away and avoid the bad publicity. Depending on the size of the Agent, they would want to avoid racking up lawyers fees, so they usually only go to Court if they think they are in the right and stand a good chance of winning.

    You then also make a complaint through their chosen redress scheme, TPOS or PRS or whoever. Provided you can prove your case, they will make an award of compensation to you. You have to exhaust the agents internal complaints procedure first, and you never know they might make an offer to you even at that early stage. Depends how big the error is and how far up the food chain it has got. To start with these things sometimes get buried as people are fearful of the repercussions.

     
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    Thank you for your reply Matthew. I guess I'm wary of causing difficulty with the LA as they are (supposedly) although all trust is gone, looking for an alternative property for my tenant and I don't want to interrupt that in any way. My hope is that if they do find somewhere he might be willing to leave. It just seems so unfair that everything is biased towards the tenant without any consideration for the landlord and their circumstances.

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    Sue

    Don't trust the LA to try hard unless they have a huge incentive to do so.

    Whilst customers can and do take umbrage and may make irrational decisions to cease a business relationship, I have never had a supplier do so. Give the LA an ultimatum - fix it by a deadline of your choosing or you WILL get legal - and make sure you have all your ducks in a row to move as soon as your deadline passes - and ensure your LA knows that is what you're doing, so he knows you're not bluffing.
    It should be relatively easy for the LA to source YOU a better property for the six months or so that the tenant can stay put - and the LA should foot the bill to avoid being sued.

     
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    David Crisp and Matthew Payne - thanks for your replies,this has been most helpful - tenant says he is moving out tomorrow....won't hold ma breath-
    Yours Hugh Archer

    Paul Barrett

    You are VERY VERY lucky.

    WELL DONE!!

     
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    Let us know what happens.

     
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    Hope he does.

     
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    Hugh

    Did the tenant move out?

     
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    Come on Hugh spill the beans did he go ? we all need some good news mate.

     
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    Bit surprised a tenant would agree to leave on a Sunday???????

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