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Twin Cities Rental Property-Consider becoming a landlord

Rental homes can be the IDEAL investment in today’s market.

IDEAL serves as an acronym to identify the advantages of rental properties:

• Income from the monthly rent contributes to paying the expenses and a return on the investment
• Depreciation is a non-cash deduction that contributes a tax shelter
• Equity grows monthly as the mortgage amortizes due to some of each payment being applied to the principal
• Appreciation is achieved as the value of the property goes up
• Leverage can increase the return on investment by using borrowed funds to control a larger asset

The combination of these characteristics working together makes rental real estate a very good investment for today’s economy and years to come. Increased rents, high rental demand, good values and low non-owner-occupied mortgage rates contribute to positive cash flows and very favorable rates of return.

Contact me for more information about actual opportunities in our local market.

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Landlords Raising Rents on Rental Property – Advice on the Tenancy Agreements

By Chris Horne

Letting agents are seeing booming demand for rental property as first time buyers and foreign workers defer buying homes amid continued uncertainty over UK house prices.

Letting agents around London and the south east in particular are seeing up to 25% more activity in their letting business compared with a year ago. Much of this rental demand is coming from young professionals and City workers who are not prepared to gamble and buy property in a weak housing market.

The result of this boom in property lettings activity are fast rising rents in certain areas as strong competition amongst potential tenants bids up prices. Reports show that landlords in these ‘rental hotspots’ are managing to secure significant rent increases.

Lucinda Richardson, lettings Manager at the Westbourne Grove branch of Winkworth said tenants renewing their agreement were typically paying 5-10% more per year, while new occupants are paying 20% more than they would have done a year ago.

Things for landlords to avoid

Therefore if a landlord is lucky enough to own residential investment property in areas of strong rental demand, what should they be doing? Firstly landlords should always be wary of offering a tenant a longer term contract than the standard 6 month fixed term tenancy in areas where rental demand is strong and rents are rising. Glynn Judd, head of lettings at the Surrey Quays branch of Kinleigh Folkard & Hayward reports that he is aware of tenants pushing for 18 month even 2 year fixed term tenancy. This is because once agreed most tenancy agreements do not allow a landlord to increase the rent during this fixed term.

Therefore the initial rent that the landlord agrees may look very appealing at the outset, but will it still look so good in 24 months time? During this time employing a standard 6 month fixed term tenancy a landlord could have legally raised the rent three times. The other alternative to a landlord is to opt for a periodic tenancy.

How can landlords raise their rents

Fixed term tenancy

How a landlord goes about raising the rent will largely depend on the type of tenancy in place. Most landlords use a fixed term tenancy agreement such as the one available on Property Hawk. In most cases a landlord will opt for a 6 month tenancy although it can be longer. This means that without the tenancy agreement you as the landlord cannot put up the rent during this period, unless the tenancy agreement makes specific provisions allowing this. These specific provisions may be by way of an escalator clause for instance stating that the rent will go up by inflation after six months.

The vast majority of landlords avoid such clauses. This is because they are seen as overly prescriptive and inflexible. Most landlords opt to review the rent when they decide whether to re-let at the end of the fixed term tenancy. This way a landlord can judge the prevailing market conditions and work out what the rental market will bare at that particular time. For instance in places such as central London and parts of the south east, rental inflation is running well ahead of general inflation, therefore for a landlord just to track inflation would mean their rents are falling behind the market.

If a landlord decides to opt to re-let to the existing tenant then raising the rent is relatively easy as all they do is create a new assured short hold tenancy with the new rent included.

Periodic tenancies

The other type of tenancy that a landlord might employ is a periodic tenancy. These are tenancies where there is no specific end date. The two types of periodic tenancy are the contractual periodic tenancy in which from the outset there is no end date, or the much more common statutory periodic tenancy. The statutory periodic tenancy comes about when a fixed term tenancy lapses.

In the case of periodic tenancies, increasing the rent is slightly more complicated because the landlord will need to go through the formal procedure as set out in section 13 of the Housing Act 1988. If the landlord wants to increase the rent and intends to keep the tenancy on a statutory periodic tenancy, they can use the special form titled Landlord’s notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy sometimes known as a section 13 notice. This form allows a landlord to propose a rent increase as soon as the statutory tenancy begins. For a contractual period tenancy a landlord can use the same form to propose an increase which will take effect one year after a tenancy begins. In both cases a months notice of the increase is required for rents paid on a weekly or monthly basis (more if the rent period is longer). With both periodic tenancies a landlord can propose further rent increases at yearly intervals, after the first increase.

Potential snags for a landlord raising rents

There are a number of potential snags for landlords when raising the rent. Not least amongst these can be scaring off perfectly good tenants by making the rent unaffordable. A landlord has to be therefore confident that they their existing tenant will be able to afford the new rent or that they will be able to quickly fill any vacancy and avoid a protracted void period.

Firstly, the snag with section 13 rent increases is generally a landlord can only raise rents once a year. In a fast moving market such as the one being experienced in parts of London and the South-East currently, annual rental increases will not keep pace with market rents meaning that a landlord towards the end of the 12 month rental period will have a rent below the open market value and therefore be missing out on potential rental income.

The other aspect about a landlord with a periodic tenancy who needs to use a section 13 notice is that it entitles a tenant who is not happy with the rental increase to apply to a Rent Assessment Committee for a determination of what rent a landlord could reasonably expect to pay if he or she was letting it on the open market under a new tenancy on the same terms. The committee has the power to agree the rent or set a rent higher or lower. The rent then fixed by the committee is the legal maximum the landlord can charge. The new rent will be payable from the date specified in the landlord’s notice unless the committee considers this would cause a tenant undue hardship in which case it may specify a later date. The landlord can propose that the rent is increased a year after the date on which the rent decided by the committee was payable.

Power of the Rent Assessment Committee

All this may sound quite daunting to a landlord. The reality is it shouldn’t be. Whilst on the face of it the Rent Assessment Committee seems to have a considerable amount of power, in reality they don’t. For a start they can only set a new rent if it is demonstrably unreasonable. The other factors that limits the scope of the Rent Assessment Committee and the tenant in ultimately setting rental levels is that the landlord retains the right to issue a section 21 notice.

This means that providing the fixed term period has come to an end by the time the notice has expired a landlords ultimate response to a rent that is unsatisfactory is to regain possession of their rental property and simply re-let it to another tenant at the rent that they and the market will bare.

What should landlords do?

The simple answer is that landlords should normally opt for a fixed term tenancy such as the free tenancy agreement available within Property Hawk’s Property Manager. A landlord should avoid the tenancy lapsing and becoming a periodic tenancy. They can do this by going through the motions of issuing a section 21 notice for possession even at the start of the tenancy to ensure that a landlord can bring the tenancy to an end. In this way a landlord is in the perfect position at the end of the fixed term to either re-let to the existing tenant at a higher rent, or if the tenant objects, to regain possession and then let their buy-to-let investment property to another tenant at the higher rent.

A word of caution to landlords in less high demand areas. Tenants can be sometimes unsettled by receiving a section 21 notice and therefore a landlord needs to approach the situation sensitivity and explain that the notice is a just a formal procedure and that they have no intention of seeing it through. The reality is for any landlord is that having a tenant paying rent, even if it is not the absolute top rate, is far preferable than having no rent at all!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Landlords-Raising-Rents-on-Rental-Property—Advice-on-the-Tenancy-Agreements&id=1041166

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Upcoming Landlord Class-I recommend YOU attend!

I mentioned in a previous post that I have attended the Homeline class.  I just got a flyer-see below-that they are offering it again.   If you are serious about being a landlord, then I recommend you attend the class.  The cost of $30 is a gift.  Paying a fine or getting sued for doing something wrong-even if by mistake-will certainly cost you more.

HOME Line attorneys will teach basic Minnesota landlord – tenant law.

Specific topics include applications, leases, repairs, evictions, lock-outs, mortgage foreclosure as it relates to tenants, and security deposits.

Check-In begins at 8:45 a.m. Training starts promptly at 9 a.m.  Fee includes cost of training outline, continental breakfast, and lunch. Please contact Alex at (612) 728-5770 x 112 or alexh@homelinemn.org with any questions or concerns.

September 11th, 2010
9:00 am – 3:30 pm

William Mitchell College of Law
ROOM # 325
875 Summit Avenue, St. Paul

HOME Line’s Tenant Hotline provides free legal, education, and advocacy services to tenants throughout Minnesota. Since 1992, HOME Line has worked to improve public and private policies relating to rental housing by involving affected tenants in the process. HOME Line is a 501(c)(3) organization.

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Disruptive Tenants

By Brendan O’Brien

The Most Dangerous Tenant

I thought I had checked everything with this prospective tenant. He had a good report from his previous landlord. He had worked at the same company for five years. His credit was fine. And he seemed like a responsible person.

But he would turn out to be the worst tenant I ever had. He drank heavily, insulted and threatened other tenants, tried to start fights, damaged their property, and even got arrested in my parking lot for being drunk and disorderly and resisting arrest.

There are many different ways to be a bad tenant, but among the worst are disruptive people. Disruptive people, in a multifamily property, can drive all of your good tenants out and permanently damage the reputation of your building. Even in a single family or commercial building, their bad behavior can cost you a fortune in legal and other costs.

Many real estate investors start with some naïve assumptions about other people. We follow the rules and treat others with respect, so we think everybody else does as well. But if you’re going to be a successful landlord, you must prepare to deal with the worst of human nature. That means using all the screening tools at your disposal; consistently enforcing a clear set of rules; and knowing what you will do for any type of tenant infraction, as well as the steps you must follow for a legal, trouble-free eviction.

The best solution to disruptive tenants is to keep them out of your properties. I believe the first step should be to check with your local landlords’ association or REIA, which may keep a tenant database. After that you can check credit, employment, previous tenancy, and criminal behavior.

For each step in the process, there’s a right way and a wrong way. With the tenant database (and indeed all background checking steps) make sure that you’ve got the right person. Many good people have suffered because someone else with the same name misbehaved. Also remember that tenant databases often include both good and bad tenants. Check with the previous landlord, who submitted your prospect’s name, to find out what he really thought about the tenant.

Credit and employment are two areas where you may decide to be flexible. Many otherwise fine people have poor credit. If the tenant has only worked at his job for a short time, talk to his employers from before that change. In employment checking, make sure you find out the employer’s phone number on your own – don’t trust the rental application. In both employment and previous tenancy checking, watch out. Former supervisors and landlords often give overly positive reports.

Make sure you check the same things, document your process, and keep a detailed record for each prospect you check out. This system will help if a rejected prospect ever sues for discrimination.

The only downside to all this checking is that you will reject more prospects than most of the other landlords in your area, and your units may stay vacant longer. But, considering the hassle and expense that a bad tenant can cause, losing a month’s rent doesn’t seem that terrible.

Once you’ve approved a rental application and the tenant has moved in, the next step is to get them started with good habits. Make clear what you will not tolerate and give the tenant a detailed list of fines and rules that are the same for everybody. Make the list reasonable. An overly detailed and nitpicky list will turn off tenants you want to have. In the first few weeks or months after the new tenants move in, stop by both their apartment and their neighbors’ or call from time to time to make sure everything is going well.

Fortunately, most of your tenant disruptions won’t be that serious. Most are minor – loud noises, improper trash disposal, or parking violations. Where the complaints are along these lines, let the tenant know he’s getting complaints and back them up with the fines you have set. Some tenants don’t even know they’re causing a problem. In any case, your response must be firm and fast. If you don’t, the tenants’ behavior will get worse.

You also must make sure not to overreact. You may have two tenants who are both perfectly responsible, but simply do not like each other. They might show their dislike by nitpicking about each others’ behavior. Or you may have a very demanding tenant who calls you with trivial complaints about his neighbors. Maybe the neighbor parked her car a little too close to his. Another couple walks around their apartment late at night. The woman downstairs has a baby who cries a lot.

To evaluate these situations, talk to both tenants, and also talk to anyone else you have living in the building. Suppose Tenant #1 is constantly complaining about Tenant #2. But when you talk to Tenants #3, #4, and #5, they all think Tenant #2 is a fine neighbor. And you know that #3, #4, and #5 are also responsible people. That makes it fairly clear that the problem is very high expectations, not bad behavior. It’s time to talk to the complainer about lowering her expectations. You don’t want a reputation as a ridiculously nitpicky landlord.

But there are three classes of tenant behaviors that you absolutely cannot tolerate. The tenant does NOT get a second chance if he fights or threatens other tenants, or engages in any illegal activity (most likely drug abuse or public drinking). You should immediately begin the eviction process, and make sure you have documentation. There’s a standard clause in most leases that requires tenants to not interfere with others’ enjoyment of the premises. That ought to cover most disruptive behavior. However, your lease should make it clear that any of the Big Three disruptive behaviors will result in immediate eviction (as always, checking with your local real estate attorney so that the language is correct).

No matter how carefully you screen prospects and set and enforce rules, you may still occasionally run into a nightmare tenant. However, these steps will make disruptive tenants much rarer, and your landlording experience both happier and more profitable.

Brendan O’Brien is the founder and president of Property Master™ Software. He is a contributing writer to REIP The Rewards® Magazine and is an active landlord and real estate investor. O’Brien designed Property Master™ with a team of 26 real estate investors and professionals to create the most comprehensive property management software solution for everyone, from first time investors to multiple property mangers. In addition to software, the advisory board has written 162 Landlording Tips that are a great resource for any property manager. For more information about Property Master™ visit http://www.PCPropertyMaster.com or email Brendan.obrien@pcpropertymaster.com

Article Source: http://EzineArticles.com/?expert=Brendan_O’Brien
http://EzineArticles.com/?Disruptive-Tenants&id=564241

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Landlords Looking to Make Additional Revenue From Tenants Alongside Rental Payments

By Chris Horne

Most landlords see the relationship between tenant and landlord as pretty straight forward & passive. The landlord provides the tenant with four walls and sometimes a bed to sleep on. In return a tenant pays the landlord an agreed rent. Occasionally if landlords are lucky they can put the rent up and that is about as complicated as it gets.

The main job for a landlord is to manage the costs such as the buy-to-let mortgage costs and maintenance costs as this will in turn maximise a landlord’s net rent. The net rent being the bit left over after a landlord’s costs have been paid each month generally referred to as a landlord’s cash-flow.

Additional revenues for landlords from tenants

However, recently and prompted by the credit crunch I’ve been seeing more and more landlords using their relationship with their tenants to make additional revenues. This is only sensible and reflects what many companies and businesses do in the wider economy.

Once a business has a customer, their next step is to see how they can retain that customer but then see if there are any way that they can make additional revenue from that customer by selling them additional services. In business parlance it’s all about increasing the average spend.

Let’s examine where it is possible for a landlord to look to make additional income from their tenant in perfectly legitimate and legal ways in order to help landlords cope with their rising costs.

Firstly, the main area where some landlords have for some time being legitimately charging a tenant money is in connection with the management costs of setting up and ending a tenancy.

For years landlords have accepted the whole vetting, letting and moving out of tenants as just part of the process of renting their investment property. However, increasing demands by government in terms of additional regulations such as the Tenancy Deposit Scheme (TDS) and HMO licensing and the soon to be introduced Energy Performance Certificates (EPCs) all increases the time burdens on landlords. These regulatory burdens often come with extra financial costs but most importantly they all take additional time without producing any additional revenue for landlords.

These administrative tasks are what in the service sector would class as professional services. For years many letting agents have been ‘making hay’ out of charging large fees to carry out these basic tasks. Residential landlords on the other hand being largely small amateur outfits have largely chosen to absorb these costs within their overall costs to their business. Given that landlords carry them out themselves and it mainly involves their own time and therefore does not involve incurring any direct financial cost; landlords have generally seen it as just part of the letting process. However, closer research amongst letting agent shows that many of these tasks are charged for.

Some are charged individually, or others collectively as part of the initial letting fee. A breakdown of these costs produces the following as legitimate fees that a landlord could charge their tenant for their professional services as part of the setting up and management of the tenancy.

Possible letting services & possible charges

Credit check £20

Interview charge £20

Tenancy Agreement £20

Setting up DD £20

TDS (guarantor fee) £50

Check in / inventory £50

Check out £50

TOTAL £230

Toby Hone of the website the-home-place in his book on surviving the credit crunch urges landlords to not ignore the potential revenue benefits of charging. He makes the simple point that:

“Why don’t you as the landlord charge your prospective tenant a fee. In most cases the letting agent would do this as a matter of course anyway. ”

His view is that a landlord could charge between £150-250 each time they let a property. Given that the average tenancy last 9 months then this could equate to £200-£330+ each tenant each year. Where a landlord has a multi let where each room is rented out then this could equate to many hundreds if not thousands of pounds each year.

Another example of charging your tenants a fee is where landlords shun the TDS in favour of using a guarantor. This is particularly popular in student letting and our student landlord expert Bee in the bonnet shows how this can be done. In this case it is perfectly legitimate for a landlord to make an admin charge for this.

Once the tenants moves out the landlord also needs to carry out a ‘check out’ for which it is also reasonable to charge a fee for.

Non-performance tenancy charges

There are other charges that the landlord should have set up automatically as part of the tenancy. These are more penalties in respect of non-performance of the tenancy agreement but nevertheless they should be in place. In a tenancy agreement it is worth installing a provision with the Assured Shorthold Tenancy agreement that includes a £35 admin charge for any late payment along with an interest charge payable by the tenant on any overdue amounts of 5% above the Bank of England base rate.

Additional services

Landlords should be aware of the possibilities of charging their tenants for additional services. Just as today consumer is always looking to ease the burden of everyday humdrum chores so tenants are often quite often happy to pay for extra services. For instance many busy professional tenants would be happy to splash out a few extra quid in rent in order to benefit from a wireless computer network or satellite TV. Once installed, these things will generate small but tangible additional revenue for a landlord.

Other services that could be charged for are a laundry & ironing service, together with a cleaner. These are all services that could potentially be attractive to your tenant and which could provide you with valuable additional revenue.

When the tenant leaves

Even when the tenant leaves this could be an additional source of revenue for a landlord. This is because if the tenant fails to clear there rubbish then a landlord is quite within their rights to make a reasonable charge for the disposal of this. Not only is there the disposal of these items but, with the advent of E-bay frequently one person’s junk is another person’s lucky find. An enterprising landlord can often find a use or value out of a previous tenants cast offs.

PropertyHawk is aimed directly at UK Landlords. The site incorporates free property management software letting a landlord track their financial data relating to their property portfolio. A mass of information on BTL mortgages and landlord insurance.

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Landlords-Looking-to-Make-Additional-Revenue-From-Tenants-Alongside-Rental-Payments&id=1464234

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How Can Landlords Keep Their Tenants Warm This Winter?

By Chris Horne

“Save on heating bills, put them on the fire” I’ve heard one landlord remark. Landlords should clearly implement a slightly more responsible attitude.

Seriously with the last vestiges of the ‘Summer’ disappearing, a landlord’s thoughts naturally turn towards securing their buy-to-let investment property for the Winter. This probably means a landlord trying to get the various outside jobs done before the weather turns.

One concern for any responsibly landlord is to ensure that the tenants are warm. This is not only a concern but also a legal obligation under section 11 of the Landlord & Tenant Act 1985

“(c) To keep in repair and proper working order the installation in the dwelling for space heating and heating of water.”

Whilst this legislation does not set out any legal minimum in terms of the temperature, keeping tenants warm does make good business sense. A warm tenant is a more likely to be happy tenant and therefore more likely to stay longer. A cold tenant is very likely to be off as soon as they can, exposing the landlord to a possible void period and to additional letting costs.

There are two ways that a landlord can make their property warmer. Firstly a landlord can insulate their buy-to-let investment property more effectively and secondly a landlord can look to increase the effectiveness of their heating system.

INSULATION IN RENTAL PROPERTY

Many buy-to-let residential properties particularly the older buy-to-let properties have sub-standard insulation. There are a number of ways that a landlord can improve the insulation of their buy-to-let investment property.

The main ones are:

Cavity wall insulation

Insulation in the loft

Draft proofing

Pipe and tank insulation

Glazing – normally installation of UPVC double glazing

There is some excellent advice on the Energy Saving Trust website on the kinds of ways landlords can insulate their investment properties, the costs involved and the potential financial savings.

Insulation doesn’t need to cost landlords the earth

The big issue that landlords have with the laudable aim of energy conservation is that, whilst the capital investment is incurred by them as the landlord; it is the tenant that effectively receives much of the financial benefit in the form of cheaper heating bills.

However, what landlords may not realise is that recent changes in the tax system means that individual landlords (and other landlords who pay income tax) who let residential property and install loft insulation, cavity wall insulation and solid wall insulation to properties have been able to claim a deduction in their income tax bill, this is called the Landlords Energy Saving Allowance (LESA).

The maximum amount which can be claimed is £1,500 per property.

Following the 2006 Budget, from 6th April 2006 the Landlords Energy Saving Allowance (LESA) has been extended to enable landlords to also claim the allowance for expenditure from installing draught-proofing and for insulating hot water systems in dwelling houses which they let.

Further information is available from Her Majesty’s Revenue and Customs.

Landlords do however need to be wary that they do not by improving their residential investment properties insulation, then cause damp problems through inadequate ventilation.

IMPROVING THE HEATING

The other way a landlord can keep their tenants warm and happy is by improving the heating. The vast majority of housing including buy-to-let investment properties now have central heating. In 2005 the English House Condition Survey found that just under 9 out of every 10 properties (88%) had central heating a further 7% had storage heaters.

The reality therefore for most landlords is that an improvement to the heating system involves an upgrade to the central heating system. The efficiency and effectiveness of a heating system largely depends on the type and age of the boiler, with most boilers lasting between 10-15 years. The difficulty for many landlords can be deciding when to upgrade to a new model. I was faced with this exact conundrum recently. I had a problem with a 10 years old boiler which packed up depriving tenants of hot water & heating making prompt action vital. The plumber suspected it was one of two parts the gas valve or the PCB board, both costing over £150 with fitting costs on top.

What did I do? Risk having one part fitted to find out it was actually the other that needed replacing? Then potentially having replaced 2 parts would I have been better off having a new boiler fitted at the outset? In the end I contacted the manufacturer and their technical department were able to run through a few diagnostic tests to pinpoint the part I needed. I am now hoping that the boiler lasts several years longer before it has to be replaced by a new condensing boiler.

Condensing boilers

Many landlords may not be aware that since the change in the Building Regulations in 2005 all newly fitted boilers have to be high efficiency, which generally means condensing boilers.

Condensing boilers are have also required to be fitted in Scotland since 1st May 2007 with the revision of section 6 of the Building Regulations.

A high efficiency condensing boiler works on the principle of recovering as much as possible of the waste heat which is normally rejected to the atmosphere from the flue of a conventional (non-condensing) boiler. The best high efficiency condensing boilers convert more than 90% of their fuel into heat, compared to 78% for conventional types. I found this useful site for a ranking of boilers in relation to their efficiency.

How do they work?

The extra efficiency is accomplished by using a larger heat exchanger or sometimes two heat exchangers within the boiler, which maximises heat transfer from the burner as well as recovering useful heat which would normally be lost with the flue gases. When in condensing mode (condensing boilers do not condense all the time) the flue gases give up their ‘latent heat’ which is then recovered by the heat exchanger within the boiler. As a result the temperature of the gases exiting the flue of a condensing boiler is typically 50-60°C compared with 120-180°C in a current non-condensing boiler. At the same time an amount of water or ‘condensate’ is produced.

The fact is if a landlord’s boiler is between 10-15 years old then it probably is not efficient by modern standards. Replacing a landlord’s old boiler with a new high efficiency condensing boiler is likely to save around a third of the heating bills straight away.

Costs

A new condensing boiler will cost about £750 inc. vat for a decent make.

However the additional plumbing kit will probably cost another £250 and then there is the fitting costs of at least £250. Bank on at least £1250.

Having purchased a new boiler landlord can then insure themselves against further maintenance costs by taking out boiler insurance.

I would caution landlords from automatically taking out this type of cover without carefully considering the benefits. This is mainly that it guards a landlord against an unexpected large bill. If a landlord’s cash-flow is stretched then this might be the safe option. However landlords should appreciate that at a minimum of £100 pa the cost of the insurance over the lifetime of the boiler would amount to the entire replacement cost. Therefore, they may be better off setting up a monthly ‘sinking fund’ equivalent to that of the insurance. This way they can build up a cash fund that is available should disaster strike. Should this not happen then the money can go towards the eventual replacement cost of the boiler.

One thing is for sure, keeping the tenants warm and happy this Winter isn’t getting any easier or cheaper!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?How-Can-Landlords-Keep-Their-Tenants-Warm-This-Winter?&id=783091

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Should Landlords Look To Sell Their Property Investment?

By Chris Horne

House prices in Britain have risen at an average annual rate at least 10 times higher than in other developed nations, such as Japan and Switzerland, and twice as fast as in the United States. The research by Policy Exchange, a Right-wing think-tank, shows that since 1970, prices have gone up by more than four per cent a year over inflation.

Property prices in Britain have risen for 13 successive years, and in the past decade the increase has been particularly steep. The price of an average home has risen from £70,000 when Labour came to power in 1997, to nearly £200,000 today. In the same period, the retail price index rose by only 30 per cent.

Should landlords sell & lock in gains

This all suggests on the face of it that a landlord should sell now and thereby lock in the capital gains they have made over the last few years on their residential buy-to-let investments.

However, a simple analysis of figures that show by how much the value of an asset has gone up doesn’t always give a clear indication that an asset is over valued. Any investor who has watched the rise in the price of gold in the last few years can verify that. Equally landlords who have watched the value of their property investments double in the early part of the Millennium only to watch them continue to spiral upwards in value all the way to the end of 2007 would have lost out on huge amounts of capital growth if they had taken such a view & sold.

An evaluation of the correct value of housing and residential property investment is far more complex than ‘prices have gone up a lot & therefore its time to sell’.

We as landlords really need to understand the factors that drive the value of residential investments and the housing market.

One key factor is affordability.

Affordability

The fact remains that buy-to-let investing takes place in a housing market which is still dominated by homeowners. Therefore a key factor in setting a price for a property is its’ affordability, particularly by the vast majority of purchasers who are buying a property for owner occupation.

Traditionally, the key metric has been the multiple of average income to property value. Historically this has been about 3.5 times average household income; it now stands at over 6. Some economists argue that this measure is no longer relevant because of a paradigm shift downwards in long run interest rates, making higher multiples more sustainable.

In the 80s interest rates were for most part in or near double figures; in the 90s they probably averaged 6-7%. This is still high by current levels; particularly when the fact that mortgage margins have reduced i.e. the differential a borrower pays above the prevailing base rate. In the 90s it ranged between 1-2%; before the recent credit crunch this had shrunk to in some cases to zero reducing the real costs of a mortgage even further. Even today after the ‘credit crunch’ it is possible to get a lifetime tracker at 6.39% or 0.89% above the Bank of England base rate.

House price “Bulls”

What the housing ‘bulls’ (those individuals that still believe we are in a rising market) argue is that what is more relevant in judging housing affordability is the proportion of household income paid out each month on servicing housing debt. After all they argue, people don’t think of multiples or margins when judging whether they can afford a property.

Their first thoughts are how much it will cost per month and how much income they have got after tax and other vital household expenses. For an indication of this we can go to the statistics provided by the Council of Mortgage Lenders (CML). These stats make interesting reading. The good news for the ‘bulls’ is that the latest figures for interest payments as a percentage of median household income was 18.8% in November 07 which is well below the 27.1% reached in the first part of 1990 at the time of the house price crash of the early 90s.

However it should be remembered that this high rate was prompted by interest rates which reached 15%. What is important is that this rising figure is the highest since 1992 when the housing market was still languishing in the depths of the last housing depression. Whilst these figures are not conclusive on their own; it shows that by any measure the costs of servicing a housing debt are becoming an increasing constraint on future house price rises.

Yields

One measure which has always been popular with property investors is the gross yield.

For landlords with a good memory, they may be able to recall when gross yields on some investment properties were in double figures. It was also up until relatively recently that many landlords could secure a reasonable level of income from their residential investment properties. However, for many residential landlords those days have gone. Small rental increases have not been sufficient to keep pace with rising capital values and rising interest rates.

The result is that the last Association of Residential Letting Agents (ARLA) review showed that gross yields had fallen to less than 5% as a UK average. This falls to 4.6% when taking into account rental voids. If management charges are also taken off, then the net yield is likely to fall below 4%. All this means that many landlords now face a cash outflow, which will remain with them for a number of years whilst rents increase and / or interest rates fall.

Housing ‘fully valued’ so shouldn’t I sell?

In conclusion then it looks on the face of it that UK housing is fully valued. Therefore, shouldn’t a landlord sell up and lock in their profits now? The decision on whether to sell a buy-to-let investment property isn’t quite as straight forward as it might first seem for a landlord. For instance, here are 5 things to consider before a landlord puts their buy-to-let property up for sale:

1 There is the small case of capital gains tax (CGT)

The Chancellor is proposing a new tax regime with a 18% band for all. However, that is still near enough a fifth of any gains a landlord has made. If a landlord has held their property for 10 years or so this is going to be a fairly high percentage of the overall value of their asset, meaning that they will have considerably less assets to reinvest in any alternatives following a sale.

2. Selling a residential investment property is not cheap.

Where an estate agent is involved and including legal fees and the new Home Information Pack (HIP) a landlord is probably looking at a minimum of 1.5% of the value of their property and that could easily increase to 2.5 or 3% in certain cases such as investment properties in London.

3.On top of this a landlord who tries to sell their residential investment property is probably best selling their buy-to-let property with vacant possession i.e. without tenants.

By doing this a landlord’s residential investment property should also appeal to the almost 90% of the residential market that are owner occupiers. This means that their investment property is empty and no rent is received during the sale period. A situation that can be particularly painful for a landlord where they still have a mortgage in place because not only are they missing out on rental income but they are also having to pay out ‘dead money’ whilst the property is being marketed. Even worst, every property speculator come opportunist knows this and assumes that you the landlord is in trouble and has to sell up. Therefore and in particularly at the moment be prepared for silly offers unless you are the lucky owner of a ‘trophy asset’ property.

4. Many landlords also buy a residential property for security.

In a world of increasing family & relationship break ups, having an additional property should the worse happen is seen by many landlords as an insurance policy against themselves or a member of their family being homeless. In addition many landlords have invested considerable time and effort buying, refurbishing and setting up their buy-to-let investment so the outright sale of their buy-to-let investment property is a large step for many landlords to take.

5.The other dilemma for landlords is what to do with any investment funds released following the sale of their residential investment property.

Many landlords have been ‘stung’ by previous investments in other asset classes such as shares. Whist the short-term gains are potentially higher, these investments are far more volatile than investments in a physical asset such as a residential investment property. At the moment cash savings are attracting a good rate of interest in the order of 6%, however most experts predict interest rates to fall throughout 2008 which means that the base rate could be as low as 4.5% by the end of the year reducing significantly the returns on cash investments.

Long -term landlords

The reality for landlords is that it’s not easy to respond quickly to trends in the housing market. For instance to sell up now and then wait 12 months to buy on a low. For a start, on a cost basis, the transaction costs of buying and selling will probably amount to 5% of setting up an investment by the time estate agents fees, legal costs and stamp duty have been factored in. Then there are the practical issues and time of identifying a suitable residential investment property, agreeing the deal and then putting it into a lettable state, not to mention finding suitable tenants. This probably goes a long way to explaining why a recent survey by the Alliance & Leicester revealed that the average period that a landlord planned to hold their investment for was 18 years. This means that most landlords choose to take a long-term approach and thereby ‘ride out’ any short term weakness in the housing market.

Financial sustainability & opportunities

A key objective for landlords now should be to ensure that their residential investment portfolio is financially sustainable. Landlords should focus on their cash-flows and take a conservative view over future property price projections.

The very nature of a property market in a slump, which appears to be the likely outcome for the UK housing market in 2008 is that it will throw up potential residential investment opportunities. Distressed sellers, repossessed buy-to-let investment properties sold at auction all make potentially excellent investments if a landlord has done their research properly, does not over borrow & invests in a ‘cash cow’ using a traditional repayment mortgage. This way a landlord will be sheltered from any down turn in residential values, as the tenant will be paying for any costs associated with these investments. A repayment mortgage will deliver a constantly reducing loan amount that should protect a landlord’s equity even in times of small falls in residential property values.

Therefore, my thoughts are that landlords thinking of selling should think through their decision carefully and make sure they are comfortable that it is the right long-term decision for them. Equally, for some landlords they might want to see the current turmoil in the credit markets and slump in house prices as a long-term buying opportunity. One thing that we are sure about is that landlords can no longer bank on rapid gains in housing values that they may have become accustomed to over the last decade. Whether a landlord decides to buy or sell; they should make sure that their investment strategy adjusts to this ‘new reality’.

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty. The service is totally free to use at propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Should-Landlords-Look-To-Sell-Their-Property-Investment?&id=999974

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Letting Tips for Landlords Renting Property to Students

By Chris Horne

Here are further tips and advice for landlords letting rental property for students. A potentially high maintenance sector of the property rental market can be made easier for landlords by following these helpful tips.

An Inventory or Schedule of condition is vitally important when landlords let a property to students. Landlords should try and find a free example of an inventory on the Internet and compile a detailed ‘Inventory, Schedule of Condition and Safety Check List’. It is worth landlords spending time on compiling an inventory that records every detail of a rental property, its contents, decoration and condition so that any damage or loss occurred during a tenancy can be claimed back.

The safety section should include: number of smoke/heat alarms, carbon monoxide alarm, make a note ‘all tested and in working order’; Landlord’s Gas Safety Certificate, PAT (Portable Appliance Test certificate of the Landlord’s electrical goods) and the 5 year, electrical certificates all supplied; burglar alarm, include note ‘demonstrated and in working order’ and fire safety equipment has been checked.

Landlords should attach photos, dated and signed by both tenant and landlord on the reverse. They should include photos of all rooms, showing positions of furniture plus key potential problem areas such as inside the cooker, behind kitchen appliances, cleanliness of lounge carpet and the condition of the garden and lawn, if they are maintaining this area.

Landlords should write ‘cleaned to a good standard’ against rooms in the inventory and provide a definition, so there can be little doubt as to what this means, such as: ”No dust or debris behind, underneath and on top of furniture, fixtures and appliances; cookers are clean and virtually free from burnt on grease, particularly on oven racks and trays; fridges, freezers and microwaves are clean and empty; Venetian blind slats, curtains and covers are clean; hard floors are mopped and any mirrors are clean; bins are washed; walls are free from washable marks and blu-tak type stains.’ and so on. A detailed inventory will support claims for damage and cleaning at the end of the tenancy.

Checkout leaflet

Landlords should devise a simple checkout leaflet, outlining the procedures and expectations at the end of the tenancy. Give it to the students at the start of the tenancy. When issuing a Section 21 notice, probably towards the end of the tenancy, remind them about the checkout leaflet.

Duty of care

A landlord’s ‘duty of care’ should include a thorough safety check of their buy-to-let property. A landlord should also provide a ‘Household Folder’, packed with helpful information. Contents could include: Moving and Living in the Premises, Student and Landlord Responsibilities, General Health and Safety, Location of Services in the House and Electrical Safety, Disposal of Refuse, Condensation, Pest Control, Use of Candles, Noise, Nuisance and Neighbour Disputes, Who is Responsible for what Repairs, Cleaning, Visits by the Landlord, Crime Prevention, Fire Safety, First Aid and Useful/Emergency Telephone Numbers. The landlord’s ‘Household Folder’ could also contain the legal certificates, instructions on the use of appliances and the buy-to-let investment’s property’s checkout leaflet.

Avoid the Tenancy Deposit Scheme (TDS)

Landlords should stop taking a security deposit and avoid the Tenancy Deposit Scheme altogether. Instead when the contract is signed, landlords should charge each student tenant a perfectly legal, £50 non-returnable administration fee. Landlords shouldn’t bother paying for a credit reference check. Students usually have very little credit history. Instead, landlords should create a separate guarantor agreement, which is usually a parent, for each tenant and include ‘joint and several’ responsibility. Landlords should remind guarantors that if they default ‘you may record this with a Credit Referencing Agency and IDS Ltd, who may supply the information to other credit companies or insurers in the quest for the responsible granting of tenancies, insurance and credit.’ Landlords should give guarantors the checkout leaflet, so they understand the standards expected at the end of the tenancy. Landlords should make sure the agreement is a deed by including the statement ‘This document is a DEED and has been executed as a DEED. This Deed of Guarantee is governed by English Law and is subject to the exclusive jurisdiction of the courts of England and Wales.’ Increasingly foreign students rent buy-to-let property and in an extreme case landlords don’t want to end up in a foreign court. If landlords are storing guarantor details, register under the ‘Data Protection Act’.

If you as a landlord no longer take a security deposit; you must not harass students for money for damage and lack of cleaning, instead send a duplicate copy of your request for compensation to the student’s guarantor and they will do the legal harassment for you. Landlords should keep copies of all correspondence.

Insurance cover for a landlord’s emergency plumbing

Landlords should purchase 24-hour emergency plumbing cover. One example of this is British Gas Homecare Agreement for central heating, plumbing, drains and electrics. The British Gas plumbing and drains insurance will cover the replacement of a washer in a leaking tap.

As far as the tenant’s responsibility for replacing tap washers, I would suggest a landlord includes a general clause in the tenancy agreement such as:

‘Replace all defective electric light bulbs, fluorescent tubes, starters, fuses, tap and flexible pipe connections to a washing machine washers and vacuum filters and belts ensuring all reasonable safety precautions are observed.’

Landlords should ensure that all their properties have accessible inline valves in the pipe work, so that leaking taps are easily isolated in order for the repair to be carried out by the tenant, if necessary.

Tenantable Repairs

Landlords should also include the following under the definition of Tenantable Repairs in their modified tenancy contract which aims to shift the responsibility for minor repairs onto the tenant & make this clear from the outset:

“Tenantable Repair” means you are responsible for carrying out safely, day to day small repairs that any home-occupier would normally do e.g. re-hanging a

cupboard/wardrobe door, replacing light bulbs and batteries, tightening screws on furniture and fixtures, refitting a door handle, bleeding radiators

of air, replacing a tap washer, removing mould, refitting a toilet seat or toilet roll holder, tightening or replacing a washer in a flexible water pipe on a washing machine. This list is indicative and not prescriptive of the types of reasonable every day repairs that need to be done to keep the Premises in the same condition as at the start of the Tenancy. This excludes items, which the Landlord has responsibility in law.

How does it work? The tenant either makes the repair. This is easy with inline valves in place or in one particular case they paid for someone to do it for them.

I suggest that it offers a landlord a way of reducing their repair costs. We would suggest that the wording in the clause is slightly amended to include the following sentence as well.

“BUT nothing in this clause imposes on the Tenant any duty placed on the Landlord by:

a. s.11 of the Landlord and Tenant Act 1985; or

b. this Agreement.”

Landlords in interpreting tenant repairs & responsibilities may find it useful to refer to Lord Denning judgment in the case Warren v Keen (1954)

Warren v Keen (1954)

(Court of Appeal, 1953)

In this judgement, Denning LJ stated:

“What does ‘to use the premises in a tenant-like manner’ mean ? ..The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys when necessary, and also the windows. He must mend the electric light when it fuses. He must unstop the sink when, it is blocked by his waste. In short, he must do those little jobs about the place, which a reasonable tenant would do. In addition, he must, of course, not damage the house wilfully or negligently; and he must see that his family and guests do not damage it; and if they do, he must repair

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Letting-Tips-for-Landlords-Renting-Property-to-Students&id=948253

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A Tenant Dissapears from a Rental Property – What Should a Landlord Do?

By Chris Horne

In many ways it’s the landlord’s worst nightmare.

You as the landlord turn up one morning unexpectedly and there it is; your buy-to-let property, empty and abandoned like the ‘Mary Celeste’. With any luck the tenant has just removed themselves and their possessions and not any of your residential investment property. Unfortunately, I was not so lucky as one New Year when I arrived at my residential investment property to discover that half of my new kitchen had also been removed, along with a new washing machine and fridge freezer. To make it worse just as I was digesting this information I heard a knock on the door. It was a prospective tenant coming to have a look around my buy-to-let property. I was it would be fair to say, pretty speechless.

What to do?

The first thing a landlord shouldn’t do is over-react and panic. Take a sharp in-take of breath and then a landlord should try and remain calm.

Unfortunately, if there are no forced signs of entry then buy-to-let contents insurance will not cover a landlord for their losses. It is worth a landlord reporting any theft to the police so that if should you catch up with your tenant at some stage the extent of your losses are documented and can be verified.

The other thing is a landlord should not assume abandonment, and go about changing locks on the assumption that the tenant has given up their tenancy. A tenant’s disappearance does not bring a tenancy to an end, even where the tenant is no longer paying the rent and has removed half a landlord’s kitchen as in my particular case. What a landlord needs to do is follow the legally required steps to bring a tenancy to an end by either issuing a section 8 or section 21 notice.

Landlords tracing a tenant

A landlord firstly should ensure that they obtain possession of their buy-to-let property legally to enable them to re-let their residential investment property. Landlords however will also want to ensure that they get any monies that were due to them before the tenants disappeared. This will probably involve taking the tenant to court.

The problem with taking court proceedings against a tenant is that a landlord needs an address for the tenant to serve the legal documents on.

The process for landlords tracing a tenant can be easy or it may prove to be impossible, particularly where a tenant is a ‘professional tenant’ & is well versed at doing a bunk and leaving their debts behind whilst disappearing into the ‘ether’. The first step a landlord should use to try and trace a tenant is to compile a comprehensive list of information that a landlord has on the tenant. A landlord should have some basic details resulting from the original credit check they carried out on the tenant. Information such as previous address and date of birth will be useful in being able to potentially trace the absconded tenant.

For instance a landlord could then use these details and the facility provided by a company such as Tracemart to try and locate the tenant.

Alternatively a landlord could employ a dedicated tracing agent such as 1st Locate who will do all the leg work for a landlord. 1st locate offer a service where they assign one of their dedicated researchers to a landlord’s case on a no results no fee basis. This service will cost a landlord £35. They also offer landlords a trace and collect service which means that they will do the work of collecting the debt as well as tracing the tenant.

Once a landlord has a tenants address they are able potentially to take legal action through the courts against the tenant to recover the debt.

Landlords employing a private investigator

Where a landlord has a very large debt amounting to several thousands of pounds and is confident that the tenant has a sizeable income or assets, in which case a landlord could consider employing a private investigator. PI’s aren’t cheap and you will be looking at paying £30+ per hour for them meaning that bills can easily run into the hundreds if not thousands of pounds. However, a good one may be able to access information that you and I couldn’t and if it means finding a solvent professional tenant it could easily be worth it.

Word of warning for landlords

However, a word of warning also gained from personal experience. Even if the landlord is successful in getting a County Court Judgement then if the tenant has little or no income and no assets, the amount that a landlord will receive could mean that a tenant will take many years to pay off the debt. The likelihood is that payment will not be continuous. In this case a landlord is right to ask themselves whether it was worth the cost and effort involved & this question should always be asked early on in any proceedings.

Even where the tenant is working and the landlord obtains an attachment to earning Order the landlord will need details of where the tenant is working. This is because the landlord or solicitor acting for them will need the employer’s details in order to be able to write to them and instruct them to make payment. The good thing once this has been done an attachment of earnings order means that a landlord’s payment is automatically taken out of their tenant’s wages, by a tenant’s employee, before they receive their net wages in the same way as tax is paid through PAYE (pay as you earn).

Selling a landlords debt

I have heard about some landlords who have attempted to sell on their tenant’s debt to a debt collection agency. The reality is that a landlord who does this will forgo most of their debt. Even for a primary debt source i.e. a debtor who might also be a home-owner the most a landlord is likely to receive from the debt collecting company is around 30p in the pound or 30%. Where more likely it is a case of a tenant that has absconded and cannot be traced; the amount a landlord is likely to receive is in the low single figures – in other words effectively nothing!

The importance of landlords vetting their tenants

All this highlights the importance of a landlord doing a good job of vetting the tenant in the first place.

This includes carrying out a credit check on their prospective tenant. Getting a good tenant at the outset will minimise the chances that the tenant is likely to abscond. Where they do; a landlord should then have the background information necessary to stand a reasonable chance of at least getting part of their money back should the tenant decide to disappear into the night!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?A-Tenant-Dissapears-from-a-Rental-Property—What-Should-a-Landlord-Do?&id=877132

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Landlords Raising Rents on Rental Property – Advice on the Tenancy Agreements

By Chris Horne

Letting agents are seeing booming demand for rental property as first time buyers and foreign workers defer buying homes amid continued uncertainty over UK house prices.

Letting agents around London and the south east in particular are seeing up to 25% more activity in their letting business compared with a year ago. Much of this rental demand is coming from young professionals and City workers who are not prepared to gamble and buy property in a weak housing market.

The result of this boom in property lettings activity are fast rising rents in certain areas as strong competition amongst potential tenants bids up prices. Reports show that landlords in these ‘rental hotspots’ are managing to secure significant rent increases.

Lucinda Richardson, lettings Manager at the Westbourne Grove branch of Winkworth said tenants renewing their agreement were typically paying 5-10% more per year, while new occupants are paying 20% more than they would have done a year ago.

Things for landlords to avoid

Therefore if a landlord is lucky enough to own residential investment property in areas of strong rental demand, what should they be doing? Firstly landlords should always be wary of offering a tenant a longer term contract than the standard 6 month fixed term tenancy in areas where rental demand is strong and rents are rising. Glynn Judd, head of lettings at the Surrey Quays branch of Kinleigh Folkard & Hayward reports that he is aware of tenants pushing for 18 month even 2 year fixed term tenancy. This is because once agreed most tenancy agreements do not allow a landlord to increase the rent during this fixed term.

Therefore the initial rent that the landlord agrees may look very appealing at the outset, but will it still look so good in 24 months time? During this time employing a standard 6 month fixed term tenancy a landlord could have legally raised the rent three times. The other alternative to a landlord is to opt for a periodic tenancy.

How can landlords raise their rents

Fixed term tenancy

How a landlord goes about raising the rent will largely depend on the type of tenancy in place. Most landlords use a fixed term tenancy agreement such as the one available on Property Hawk. In most cases a landlord will opt for a 6 month tenancy although it can be longer. This means that without the tenancy agreement you as the landlord cannot put up the rent during this period, unless the tenancy agreement makes specific provisions allowing this. These specific provisions may be by way of an escalator clause for instance stating that the rent will go up by inflation after six months.

The vast majority of landlords avoid such clauses. This is because they are seen as overly prescriptive and inflexible. Most landlords opt to review the rent when they decide whether to re-let at the end of the fixed term tenancy. This way a landlord can judge the prevailing market conditions and work out what the rental market will bare at that particular time. For instance in places such as central London and parts of the south east, rental inflation is running well ahead of general inflation, therefore for a landlord just to track inflation would mean their rents are falling behind the market.

If a landlord decides to opt to re-let to the existing tenant then raising the rent is relatively easy as all they do is create a new assured short hold tenancy with the new rent included.

Periodic tenancies

The other type of tenancy that a landlord might employ is a periodic tenancy. These are tenancies where there is no specific end date. The two types of periodic tenancy are the contractual periodic tenancy in which from the outset there is no end date, or the much more common statutory periodic tenancy. The statutory periodic tenancy comes about when a fixed term tenancy lapses.

In the case of periodic tenancies, increasing the rent is slightly more complicated because the landlord will need to go through the formal procedure as set out in section 13 of the Housing Act 1988. If the landlord wants to increase the rent and intends to keep the tenancy on a statutory periodic tenancy, they can use the special form titled Landlord’s notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy sometimes known as a section 13 notice. This form allows a landlord to propose a rent increase as soon as the statutory tenancy begins. For a contractual period tenancy a landlord can use the same form to propose an increase which will take effect one year after a tenancy begins. In both cases a months notice of the increase is required for rents paid on a weekly or monthly basis (more if the rent period is longer). With both periodic tenancies a landlord can propose further rent increases at yearly intervals, after the first increase.

Potential snags for a landlord raising rents

There are a number of potential snags for landlords when raising the rent. Not least amongst these can be scaring off perfectly good tenants by making the rent unaffordable. A landlord has to be therefore confident that they their existing tenant will be able to afford the new rent or that they will be able to quickly fill any vacancy and avoid a protracted void period.

Firstly, the snag with section 13 rent increases is generally a landlord can only raise rents once a year. In a fast moving market such as the one being experienced in parts of London and the South-East currently, annual rental increases will not keep pace with market rents meaning that a landlord towards the end of the 12 month rental period will have a rent below the open market value and therefore be missing out on potential rental income.

The other aspect about a landlord with a periodic tenancy who needs to use a section 13 notice is that it entitles a tenant who is not happy with the rental increase to apply to a Rent Assessment Committee for a determination of what rent a landlord could reasonably expect to pay if he or she was letting it on the open market under a new tenancy on the same terms. The committee has the power to agree the rent or set a rent higher or lower. The rent then fixed by the committee is the legal maximum the landlord can charge. The new rent will be payable from the date specified in the landlord’s notice unless the committee considers this would cause a tenant undue hardship in which case it may specify a later date. The landlord can propose that the rent is increased a year after the date on which the rent decided by the committee was payable.

Power of the Rent Assessment Committee

All this may sound quite daunting to a landlord. The reality is it shouldn’t be. Whilst on the face of it the Rent Assessment Committee seems to have a considerable amount of power, in reality they don’t. For a start they can only set a new rent if it is demonstrably unreasonable. The other factors that limits the scope of the Rent Assessment Committee and the tenant in ultimately setting rental levels is that the landlord retains the right to issue a section 21 notice.

This means that providing the fixed term period has come to an end by the time the notice has expired a landlords ultimate response to a rent that is unsatisfactory is to regain possession of their rental property and simply re-let it to another tenant at the rent that they and the market will bare.

What should landlords do?

The simple answer is that landlords should normally opt for a fixed term tenancy such as the free tenancy agreement available within Property Hawk’s Property Manager. A landlord should avoid the tenancy lapsing and becoming a periodic tenancy. They can do this by going through the motions of issuing a section 21 notice for possession even at the start of the tenancy to ensure that a landlord can bring the tenancy to an end. In this way a landlord is in the perfect position at the end of the fixed term to either re-let to the existing tenant at a higher rent, or if the tenant objects, to regain possession and then let their buy-to-let investment property to another tenant at the higher rent.

A word of caution to landlords in less high demand areas. Tenants can be sometimes unsettled by receiving a section 21 notice and therefore a landlord needs to approach the situation sensitivity and explain that the notice is a just a formal procedure and that they have no intention of seeing it through. The reality is for any landlord is that having a tenant paying rent, even if it is not the absolute top rate, is far preferable than having no rent at all!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

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http://EzineArticles.com/?Landlords-Raising-Rents-on-Rental-Property—Advice-on-the-Tenancy-Agreements&id=1041166

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Advice For Landlords Going To A Court Of Law Against A Tenant

By Chris Horne

Landlords should see going to court as a landlord’s last resort. Unfortunately though, a court appearance is a fact of life for many landlords who are looking at regaining possession of their buy-to-let investment property, or are simply trying to retrieve rent & other monies owed to them by their tenant.

It is almost certain that any case that does go to court involving a landlord will end up in one of the 218 county courts in the country which deal with all but the most complicated civil law proceedings. Each court has Bailiffs who enforce court orders and seek to collect money if a judgment has not been paid.

So as a landlord you have filed court proceedings and the day is fast approaching when you will have to appear. What does a landlord need to do?

Justice

Firstly, a landlord should dispel any romantic notion that a landlord’s court appearance is a mechanism to bring about justice after months of suffering at the hands of a bad tenant. One landlord neatly summarised the legal system governing the renting of property:

“it’s got sod all to do with who’s right and who’s wrong, just who’s filled in the proper bits of paper and knows their bundle of papers really thoroughly.”

This means that even when you as a landlord know that you have done the right thing, this will count for nothing in the eyes of the law. Landlords should realise that going to court is case of proving a set of events against a list of very specific criteria. It is nothing to do with justifying that you the landlord are a good person and that your tenants are bad.

A landlords preparation for a court appearance

Careful preparation is definitely the key to any landlord’s court appearance, particularly if the landlord is representing themselves. A landlord really needs to know what the Civil Procedure Rules (CPR say about the area of law they are taking action over. For example, the repossession of a landlord’s buy-to-let property following a period of non-payment of rent. Civil Procedure Rules (CPR for those landlords that haven’t come across them before are the procedural code that sets out how the court deals with cases in a just manner. Landlords before going to court should be aware of it and in particular the first few parts of the Civil Procedure Rules (CPR that deal with how court business is run in respect of paperwork, dates of service, etc.

It’s all about the evidence a landlord can present

As I mentioned previously the secret for any landlord who wants to obtain justice is providing sufficient evidence. Before going to court a landlord will have to submit a pile of documentary evidence. This folder of documentary evidence is known in legal parlance as a “bundle” and it should contain all the evidence that a landlord refers to in their statement. This might be letters that have been exchanged between the landlord and tenant, rent statements, the tenancy agreement, etc. A landlord should prepare their table of contents carefully, giving the date, a name for the entry (e.g. e-mail from defendant to landlord) and a one-line summary of the important point in the document. (For example a defendant states that they have no money available to pay rent). It is important that the landlord numbers the pages in the bundle and that they know what is where in case the judge decides to ask a question about it. A landlord should put post-it notes on the edges of their own copy so that they can find things quickly and simply. A landlord should present the court’s bundle in a ring-binder folder so the judge can easily get to the pages that the landlord refers to (this is a requirement of the Civil Procedure Rules (CPR anyway.)

A landlord should establish a clear timeline of everything that has happened to assist the judge in their determination. The landlord should also endeavour to give precise dates and amounts of money.

Finally, in preparing their statement, where a landlord makes reference to letters, e-mails etc, a landlord should make a note in their statement of the exact page number where this bit of evidence occurs in the landlord’s bundle. This will help the judge when referencing the evidence and is also a requirement in the Civil Procedure Rules.

Most importantly a LANDLORD SHOULD BE WELL PREPARED. More importantly, they should be better prepared than their opponent, THE TENANT.

Tips for landlords on the court appearance

1. Firstly, a landlord should try and stay calm. A landlord should present their case in a dispassionate and calm manner. Getting worked up or annoyed will not help a landlord’s case but getting across the facts and evidence will.

2. Court appearances are often brief. Landlords shouldn’t expect an epic appearance. Where the defendant (the tenant) fails to show which is quite common and the evidence provided to the court is clear cut, the whole thing could be over in 5 minutes.

3. It is always useful for the landlord to have the basic facts on a single piece of paper as an ‘aide memoir’ and for easy reference listing the page or paragraph reference in the landlord’s bundle of evidence (the landlord should bring the full details as well just in case)

If for example, the landlord is seeking possession under section 8 grounds the landlord might have the following information to hand:

* Tenancy start date

* Date the Section 8 Notice was served and how (proof of postage if the landlord has it)

* Arrears figure worked out to the set date. I normally do a large print spreadsheet for the judge to see.

4. A landlord should keep their answers to any questions short (yes / no). A landlord should be clear and concise. Landlords will probably find that the tenant will waffle on annoying the judge and digging a deeper and deeper hole for them selves. Remember a landlord can never prove a negative. For instance, that a tenant has not paid rent. Instead, a landlord should ensure that they lodge whatever evidence they hold and then claim that a tenant has not paid the rent; they should let the tenant prove that they have.

Remember all the evidence that a landlord has produced in court should have been submitted beforehand within a landlord’s witness statement. The judge and the defendant will get a copy of this before the hearing.

5. Landlords should be aware that courts and even judges are not infallible. Therefore a landlord should always check any judgement carefully to ensure that the law has been correctly applied. If in doubt a landlord should always seek clarification from the court, or if a landlord is still unsatisfied they should seek professional advice. There have been cases for where the admin staff working at the court have not been clear on the judgement and issued an incorrect judgement or even that a judge has misinterpreted the law!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty. The service is totally free to use at propertyhawk.co.uk

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