Monthly Archives: August 2017

Letting Agents – landlords should avoid them!

Landlords – how to save around £5500 letting your property

Letting agents charging outrageous fees to landlords

There has been a lot of discussion recently about how letting agents regularly rip off tenants – and they do. The government is belatedly introducing legislation to restrict their fees to tenants. But they also rip off landlords and whilst it’s difficult for tenants to avoid them, it’s much easier for landlords, as long as their property is local.

Given letting agents outrageous fees to landlords, it’s incredible they have the nerve to invent all the other charges they make to tenants – that’s why most tenants and landlords alike dislike them.

Letting Agents’ charges to landlords

Agents love to talk in terms of percentages because it enables them to disguise the iniquitous levels of charging they engage in. So let’s take a property that the rent is £1500 per calendar month. I have taken as an example the quoted fees of a well know high street agent, which do include landlord rent guarantee insurance.*

I am assuming the case of tenants who remain in the property for a total of two years…

These agents charge 7.5% plus VAT for Sole Letting Rights – this means that WHOEVER lets the property this agent gets their cash.

The real costs of using a letting agent

  1. Letting fee for let only will be £1500 x 12 x 7.5% = £1350.00 plus VAT for the FIRST year, paid in advance.
  2. Let’s say you are stupid enough to use their ‘Full Management Service’. This involves collecting the rent – it just goes into their account before eventually going into yours. They deal with everyday calls from the tenants and make 6 monthly inspections etc. Add an EXTRA 6% plus VAT. So that’s £1500 x 12 x 6% = £1080.00 per annum extra plus VAT.
  3. Providing you with an Inventory – between £140 – £200. So, let’s say £170 on average.
  4. If the same tenants simply decide to stay on in the premises which involves the agent in doing VIRTUALLY NOTHING they will charge the landlord another 7.5% plus VAT – Yes ANOTHER fee, amounting to £1350.00 plus VAT

Let’s add up all the bold figures because they are indeed bold. That’s £1350.00 x 2 + £1080 x 2 + £170.00 = £5030 plus VAT where applicable.

So, you let a flat or house for £1500 pcm and end up paying the letting agent £5030.00 plus VAT, which is £6036.00! 

Even if you only elect for the let only service, over two years it would cost you £2700.00 plus VAT which is a massive £3240.00. And all this is paid up front at the beginning of each year.

Letting agents fleecing the tenants as well

So the letting agents get all this money from the landlord then they proceed to rip off the tenants for even more money!

They have various ingenious made up charges, such as ‘Administration Fees’, ‘Checking In Fees’, ‘Checking Out Fees’.

Then there’s the scandalous ‘Holding Fees’ to retain a property while referencing is carried out. It is reasonable to withhold them in the event that the tenants change their minds. But they also withhold these fees in the event that the references come back as unsatisfactory. These fees can be as much as £700 – £800. They probably hope they’ll come back as unsatisfactory.

Some letting agents charge tenants for ‘drawing up the Assured Shorthold Tenancy’ document’. This takes about 15 minutes to revise a template on their system.

And then there is referencing. Charging for this is justified, but for tenants in full-time employment with proof of previous address etc it COSTS around £10.00 per tenants. Many agents charge around £60 – £70 per tenant.

If you’re a landlord and you can, just let it yourself

As a landlord you can list your property on the main portals like Rightmove, Zoopla, Primelocation etc, using companies that will charge you around £60.00. You then ensure that you THOROUGHLY reference any prospective tenants rather than saying to yourself ‘Oh they seem such a nice couple’.

Don’t forget Landlord Rent Guarantee Insurance

Then you buy Landlord Rent Guarantee and Legal Expenses Insurance* – we do it for about £105.00 per property per year.  This insurance pays your rent in the event that the tenants stop paying for any reason and the legal team then go to work to evict the tenants as soon as possible. Strict tenant referencing is a requirement of this insurance. Let’s assume you charge the tenants for referencing, which is reasonable then your total outlay over two years will be about £170.00.

So it’s your choice. Pay a letting agent £3240.00 or £6036.00 including VAT or spend £170.00 letting it yourself. Some agents will charge even more than the amounts quoted above and some will negotiate for less but as the Americans say, I think it’s a no-brainer.

 

LandlordsandLetting – Affordable landlord insurances

10 years of anti-landlord legislation from Tony Blair to Theresa May

10 years of anti-landlord legislation. Why?

What a difference a decade makes!

At the time of writing (2017) over 100 new pieces of landlord legislation have been introduced since 2007 to make life more difficult for the small private residential landlord, whilst favouring major corporate ones like insurance companies. Why have there been 10 years of anti-landlord legislation?

It used to be The Bankers (and rightly) but increasingly since 2007, private residential landlords have been the target for a relentless onslaught of legislation by central and local government. I think that no other group in society has been attacked so relentlessly and unjustly and there is a reason for this.

Tories join in the landlord bashing

Labour politicians have always hated private landlords and have passed legislation to control rents and other aspects of letting ever since the 1960s. It’s in their DNA. But in recent years, the so-called Conservative Party has enthusiastically joined in the game. They have proclaimed that evil greedy private landlords are preventing ‘young first-time buyers’ from getting on the proverbial property ladder by snapping up available property.

But I suspect that these crocodile tears for dispossessed first-time buyers are really there to hide their true aim. And that is to corporatise the private rented sector. For years, City institutions have looked on enviously at the returns private landlords were achieving and have been upset that such investors have shied away from their rip-off pension funds. Add to this the derisory interest rates of recent years and you can see why so many people have felt that investing in buy-to-let was their only viable option.

Now, whilst I totally support legislation that genuinely tackles rogue landlords, the problem is that much of the new legislation and regulations actually hit the decent law-abiding landlord. Rogue landlords don’t give a damn about HMO rules and registration etc. And if they want to get a tenant out they don’t bother with Repossession Orders etc they just go round there and intimidate them until they leave.

List of 10 Years of Anti-Landlord Legislation

Here is a list (not in chronological order) of only the most prominent anti-landlord legislation of the past 10 years.

  • In 2007 the government introduced the law requiring landlords to deal with security deposits in a prescribed manner. Generally I believe this was good thing but it does add to the bureaucracy involved in starting a tenancy. And if you don’t comply it can lead to the landlord having to compensate the tenant with up to three times the deposit amount and also forfeit the right to issue a Section 21 Notice.
  • Recently the government made it a legal responsibility for all landlords to issue tenants with their How To Rent booklet.
  • Landlords also now have to check on a prospective tenant’s RIGHT to rent. The landlord is supposed to act as an unpaid immigration official and check that the tenant has the right to live in the UK. Saves on immigration officers though I suppose.
  • Since October 2015 all landlords have a statutory obligation from day one to supply and install working smoke an carbon monoxide alarms on every floor that may be used wholly or partly for accommodation. They have to demonstrate how to use them and then get the tenant to sign to say that they have been shown how to use them!
  • Any property of 3 or more floors and/or housing five or more people not living as one household is classed as an HMO (House of Multiple Occupation). And every HMO (unless you’re a rogue landlord of course) requires guess what? A Licence from the local authority.
  • And talking of licences and ways local authorities can prey on landlords, many local authorities now require EVERY let property to be licensed and of course that costs more money. They don’t actually DO anything except take the money off the landlord and eventually email him or her a certificate – a nice little earner indeed.
  • By Law, all tenants have to be supplied with an Energy Performance Certificate (EPC). Who the hell reads those things anyway?
  • From April 1st 2016 Boy George introduced some draconian disincentives to landlords before he was finally sent packing by Mother Theresa. It is very complex but the first tax change was a gradual lessening of the allowable mortgage interest expenses on buy-to-let mortgages. This will eventually drive many landlords away from buy-to-let completely – depending on how heavily leveraged they are.
  • Osborne also introduce legislation that means that anyone buying a buy-to-let property has to pay 3% more Stamp Duty Land Tax (SDLT) than if they were buying for owner occupation. However, if you – or should I say, a large company, buys six properties or more simultaneously then the SDLT is significantly LESS than even an owner occupier would pay. It’s classed as a ‘commercial purchase’ for tax purposes. Guess who that benefits?
  • He also made changes to WHEN a landlord has to pay capital gains tax on a property he or she sells. Originally you had until the next tax year but now I think it has to be paid within three months of completion. You will need to check on the precise period as I am not sure.

Complexity of Anti-Landlord Legislation

You see, the main reason that these 10 years of anti-landlord legislation favours corporate landlords is the fact that it is so labrythine! It’s so complex that even small professional landlords find it hard to navigate. However, if you are The Prudential or similar then you just employ a specialist landlord and tenant lawyer full-time – easy!

So how long before landlords decide enough’s enough?

The only reason that so many small private landlords are continuing is that there nowhere else for them to invest. Stocks and shares are doing well at the moment but they are risky. Pension schemes are notorious for ripping-off people and who is going to invest their money in a so-called safe bank and get 1% interest if they’re lucky?

I predict though that if interest rates do eventually move upward by even a relatively small amount it will cause a massive earthquake in the UK property market because there are many older reluctant landlords who would much rather get at least a modest return on their savings than endure these increasing attacks from government.

More than ever Landlord Rent Guarantee Insurance matters

Given the mounting anti-landlord legislation it makes more sense than ever to have Landlord Rent Guarantee and Legal Expenses Insurance. It costs just over £100 for 12 months cover per property from LandlordsandLetting – this covers up to five named tenants in that property.

 

LandlordsandLetting

Affordable landlord insurances