The developing scandal of misappropriated tenants’ deposits has exposed landlords to millions of pounds of liability.

EstateAgentToday.co.uk – 12 Jan 2010

Landlords bear the legal responsibility, even though it is letting agents that have spent, lost or vanished with tenants’ deposits, a London agent has said.

Eric Walker, managing director of Bushells, says there are massive flaws in the tenancy deposit legislation, which leave innocent landlords breaking the law.

He believes that all letting agents should submit to regular auditing or pay all clients’ money in to a custodial scheme.

He said: “The real time-bomb is where agents hold the money in their own account and register it with a scheme, then for whatever reason cease to be members of that scheme.

“This leaves the landlord with a huge liability in the event that the tenancy is extended or renewed, as the deposit is legally no longer registered.

“A clients’ account may well be ring-fenced, but there is no way of knowing whether the correct amount of money is in it unless it is independently audited. Simply, the amount which should be held is registered with a scheme but is never reconciled with the actual balance of the account.

Full Article visit http://www.estateagenttoday.co.uk

Tenant defaults could soar over the next year amid reports that up to one million households have borrowed money on a credit card to pay their mortgage or rent over the past year, says leading tenant eviction and rent collection firm Landlord Assist.

Despite restrictions on credit and reports of many people paying off personal debt, an exclusive YouGov poll for housing charity Shelter reveals a disturbing picture of more than a million people taking desperate measures with credit cards to keep a roof over their head.

The survey asked 2,022 people to detail if they had paid their rent using a credit card in the last twelve months with 6% of those replying saying they did – suggesting a national figure of more than a million people.

The problem was most alarming in London with a staggering 12% using credit cards to pay their rent.

Full Article visit www.wiltshirebusinessonline.co.uk

While 2009 was a difficult year for the entire property market, 2010 looks likely to present an even greater challenge for the private rented sector (PRS), according to the Association of Residential Letting Agents (ARLA). Yet there are also opportunities, in particular as availability of lending begins to increase while house prices are still historically low, enabling timely investors to purchase properties for the buy-to-let market.

Supply & Demand
The residential rental market will continue to stabilise in 2010, with property oversupply decreasing due to reluctant landlords leaving the market. Evidence of increasing sales in certain areas seems to indicate this trend.
 
“As demand rises, in particular due to a lack of social housing, there will also be mounting pressure on the sector to provide good quality rental properties,” says Ian Potter, operations manager at ARLA. “There has been little commitment from the Government thus far on economic measures to help the wider industry meet property demand, but increasing demand should have a positive effect on the PRS, creating opportunities for new and existing investors and driving standards up.
 
“In a recent debate the Housing Minister displayed a lack of empathy with those living in the PRS when he argued that it consists of three million households – when it in fact consists of eight million people. Perhaps we should question why he seems to have depersonalised the PRS, as the Government continues to evade implementing measures to help the sector.”
 
Rental arrears and mortgage defaulting
Should unemployment continue to rise, putting pressure on tenants’ financial stability, many will not be able to pay their rent – often because of deficiencies in the system with the Local Housing Allowance (LHA). While ARLA research has shown that the number of tenants struggling to meet rental payments dropped towards the end of 2009, other research shows it is still a problem that has a knock-on effect across the sector.
 
At the other end of the supply chain, landlords who default on their mortgage put their tenants at risk. The Government has already indicated a move to support tenants’ rights in this situation and may pass a Private Members Bill for reform in the first half of 2010.
 
“Mortgage defaulting is a problem that will not go away in a hurry, and we have long emphasised the importance of careful selection of both tenants and landlords to ARLA members, as well as the implementation of contracts and agreements,” continues Mr Potter.
 
“The Government’s proposed changes to improve standards should go a long way in increasing the desirability of the PRS to tenants as a choice of tenure. However, when the Government implements these changes it needs to ensure that they are fair on all parties in the transaction; landlord, tenant, agent and lender.”
 
Licensing of agents
Mr Potter says: “The Government has still not made good its proposal to introduce a regulatory scheme for letting agents, or a national register of landlords. Yet with increasing numbers of new landlords and new properties coming onto the market, as investors take advantage of the downturn in property prices, it will be crucial to ensure best practice and high standards across the sector.”
 
ARLA launched its own licensing scheme in May 2009, making it mandatory that any principle of a letting agency wishing to become a member of ARLA now has to apply to become an ARLA Licensed agent, and abide by ARLA’s rules and stipulations.
 
“Our scheme has been an overwhelming success, with support for ARLA membership up post-launch, showing just how keen ethical agents are to oust bad practice and promote high standards,” says Mr Potter.
 
Fuel poverty and energy efficiency
ARLA predicts that throughout 2010 standards will become an even greater issue, as homeowners and landlords alike are encouraged to make their homes energy efficient. Yet without incentives like tax relief, it will be difficult for an already struggling sector to make the necessary improvements.
 
“The Pre-Budget Report was a missed opportunity for the Government to show its commitment to the PRS – the boiler scrappage scheme, for example, should include rental properties and be part of Landlords Energy Saving Allowance (LESA).”

Please visit www.arla.co.uk for further information and original article.

Former Mayor of London Ken Livingstone spoke to Property Week about how the Prince of Wales has created a tragic lost opportunity by interfering in the planning process of Chelsea Barracks. He also discusses Boris.

The property market was unexpectedly resilient in 2009, probably because of low turnover and rock-bottom interest rates. But what does next year hold? We asked the experts for their predictions.

Richard Evans, The Telegraph – 15 Dec 2009

Ed Stansfield of Capital Economics

We expect house prices to fall back by about 10pc next year.

The logic is that we are suspicious that this year’s price rises are meaningful. The rebound we have seen seems odd given the economic background, while the level of transactions has been very low.

The market has been driven by a few cash-rich buyers, including first-timers with access to the ‘bank of mum and dad’ and overseas buyers who have been taking advantage of the weakness of sterling to snap up properties, especially in London.

We believe that any shock to sentiment could wipe out this year’s gains.

One factor supporting the housing market has been the relatively mild rise in unemployment. If employers continue to avoid laying people off, our forecast of a 10pc fall in house price could turn out to be pessimistic.

But if the economy fails to recover, companies may feel they can no longer keep people on. Our hunch is that considerable job losses are in the pipeline.

Full Article

By the end of the year, total annual returns had reached 4.1%, allowing for a rental yield of 4.6% after voids and a small capital loss on falling house prices. In 2009, a typical landlord lost just £600 on the capital value of his property, but earned £8,000 in rent, leading to a total profit of £7,400.

By contrast, in 2008, a typical landlord would have lost 8.8% even after allowing for rental income. This means for 2008, a typical landlord lost £23,000 in capital as the property fell in value, and earned £7,900 in rent for the full year, leading to a total loss of £15,100.

For 2010, landlords can expect to make £8,000 in rental income and at slightly below current trends, capital gains of around 5%, equivalent to a capital return of around £8,000. This would bring a total return of £16,000, or just under 10%.

For full article visit mortgage introducer

Peter Cobmetatos, the BPF's head of investment and finance looks at the successes and failure of the pre-budget report.

RICS publishes the resulys of its residential lettings survey for October (3rd quarter) 2009.

Surveyors expect to see rent rises in the New Year as the number of rental properties coming onto the market fell for the first time since January 2008, says the latest RICS Lettings Survey.

The recent pick up in the housing market seems to have led to drop off in the number of rental properties, particularly houses, being made available and as a result surveyor optimism has increased for the first time since July 2008. 22 percent more surveyors expect rents to rise rather than fall in the next three months.

The drop off in supply is the main driver for the more positive sentiment, with new instructions reaching their lowest levels in the surveys history (1998). A net balance of 11 percent of surveyors are seeing the number of new instructions coming onto the market falling rather than rising.

This is in stark contrast to levels seen late last year when the housing market was still suffering from falling prices and many would-be sellers were turning to the lettings market when their houses failed to sell.

Currently the reading for past rents, although still negative, is the least so since July 2008 with only 4 percent of Chartered Surveyors still reporting falling rather than rising rents, indicating that the downward pressure on rents is already starting to ease. Significantly London and the North are already seeing the majority of surveyors reporting price rises over the past three months.

Demand for rental property is still rising as 16 percent more surveyors saw activity over the past three months pick up; in particular demand for houses was particularly strong with 22 percent more surveyors reporting rising rather than falling numbers of people looking to rent. Tenant demand was strongest in London, but increased in most other parts of the country bar the east.

Full RICS article here