With more and more legislation piling on to residential landlords and their agents, Batcheller Monkhouse Lettings is in the best position to help.
That strength is particularly relevant at the moment when there is a lot of talk about unprofessional behaviour amongst letting agents and the need for the industry to be regulated by a Government body. Currently, anyone can set up as a lettings agent in a back garage with a computer and a website.
We are well ahead of the competition. Firstly all of our offices have experienced and Association of Residential Letting Agents (ARLA) qualified staff, which ensures they have a confident knowledge of the latest changes in legislation, compliance and best practice. This gives the best possible service and protection to our landlords. We are members of the property ombudsman scheme and the Tenancy Deposit Scheme, ensuring deposits are protected. Finally, we are already regulated by the Royal Institution of Chartered Surveyors.
I would still support the establishment of a new Government body to regulate the lettings industry as there are too many rogue agents out there. We have to connect with landlords and tenants on a personal basis. We have to manage the expectations of landlords who may be petrified about handing over a million pound house to an agent. The flip side of that is that the tenant has to know what the agent is doing: they have to be happy that they are renting a property in good order and expertly managed. The key to these relationships is flexibility.
I mentioned earlier that we are experienced in new legislation, and there is a lot more of it now than there used to be. For example, from October 2019, there is likely to be a Government ban on tenancy fees charged by letting agents. These will be passed on to landlords who will undoubtedly seek to protect themselves by seeking higher rents.
Landlords will respond in the same way to attempts by the Government to bring in compulsory testing this year on fixed wiring for light switches, plugs and sockets. Portable appliance testing should be done as a matter of course as part of the electrical installation condition report. But there is not a legal requirement yet for fixed wiring, even though a tenant who suffered an electric shock could sue their landlord. Landlords will have to pay for the testing, and this may further increase pressure on rents. It is the market, however, that will decide, but here one would expect well presented and managed properties to secure the best rents and retain good tenants for longer.
Another charge faced by landlords is for the renewal of their Energy Performance Certificates (EPCs), the cost of which varies from £75 upwards. EPCs were introduced in 2007 and were due to last for 10 years, so many will have to be renewed this year. As well as renewal, new EPC regulations came into force from 1st April 2018. These bring the minimum level of an EPC up to an “E” rating from the current “F” rating. Many older properties may not be able to reach the new minimum – if they are listed, for example. In these circumstances, they can apply for an exemption on a Government website.
County councils will police the new regulations, and any EPC below the “E” rating, whether at expiry or at renewal of a tenancy, will have to be assessed and works will be required as necessary. All properties must comply by 2020.
The new EPC rules may require expenditure. But by careful selection of this and some other commercial improvements, the rental return on a property may well improve. Warm and well equipped houses let faster, achieve higher rents and keep tenants longer – increasing the net return to the landlord. One point worth bearing in mind is that without an EPC, a landlord’s notice to quit may be ineffective.
Away from legislation, the lettings market itself is set for some big changes. Figures from ARLA show that by 2025, 60% of renters will be aged between 20 and 36. They won’t be able to buy so will prefer the flexibility of renting. To give tenants greater security, there are plans for three year tenancies.
Tenants we deal with from the middle and upper end of the market will pay more rent for a high specification property. At the top end, this is usually four bedrooms and upwards with carpets, curtains, a lot of fittings, a swimming pool and perhaps a tennis court. These typically fetch anything between £2,000 and £4,000 a month.
Customers are telling us that there is a shortage of these good quality residential lettings on the market. Our experience is that there is a lot of property out there which is run down and dilapidated. We advised one last year who was receiving £850 a month rent and he redecorated and put in a new kitchen. Now, he is getting £1,165 a month, offering a 15% return on the investment in improvements.
The Class Q Permitted Development rights may create opportunities to convert larger agricultural buildings to residential dwellings to meet this growing demand from the let. In the last four years, we have seen more farmers do this as they are squeezed on their income from farming.
The key to a successful letting enterprise is attention to detail, a strong working relationship with owners and the ability to provide tenants with a reliable and efficient management service. Professionalism is everything.
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