Some landlords in Dunstable and Leighton Buzzard are still unaware of changes in legislation that have occurred in recent years risking large fines or legal action
It is not unknown for a passing landlord to walk into our shop on Church Street in Dunstable to ask for some advice. Something they might have read recently or has been worrying them for a while and they need to clarify.
Last year we had 5 landlords who manage a property themselves come in and ask me about the tenant deposit money they were holding. Not aware of the legislation they had either placed the money into a new bank account thinking that was sufficient or had just placed it into their own account knowing they would have to refund it when the tenant left. In all cases they had fallen foul of legislation which insists tenant deposit money must be place/registered in a deposit scheme within 30 days of receiving it. For them they had innocently falling foul of the legislation which could have repercussions if the tenant realised. There were a few options available to them and 3 of them decided to hand over the management of their properties to Belvoir realising having spoken to me that there were other processes they should have followed that they hadn’t. Two other landlords who came into our shop last year to ask advice on serving a Section 21 notice to end a tenancy also had not placed the deposit money into a relevant scheme.
In October 2015 it became law for all rental properties to have a smoke alarm fitted on each floor of a property. Before October 2015 I had highlighted this in some articles http://bit.ly/1Mav9uQ and now 16 months later this is still a highly ranked search item on the Internet and nearly 2,500 have accessed my article when searching along the lines of ‘ Does a landlord have to install a smoke alarm’ and clicking on my article found at http://bit.ly/1Mav9uQ. This is a search made by both landlords and tenants and I also receive calls from landlords around the country who have found my article and call me to clarify their responsibility. The cost of a battery operated smoke alarm is £5 so wouldn’t you just install at least one anyway? Before the legislation in 2015 I always carried spare ones and fitted at least one in a property we managed if none were fitted.
I was surprised this week to see a tenancy agreement signed by a tenant this month which was produced by an Estate Agent in London and executed by another local estate agent where the last page of the tenancy was a Section 21 notice to end the tenancy after 6 months. This was standard practice by many agents in the past but the Deregulation Act 2015 brought in new procedures for serving a Section 21 notice one of which is to make it illegal to issue a Section 21 notice within the first 4 months of a tenancy. Therefore this notice signed by the tenant is null and void and it is very surprising to see 2 agents letting this through. I have also not seen evidence that the tenant was issued with the ‘Right to rent’ guide, gas safety certificate and EPC which are also a legal requirement.
This all goes to show that not only are landlords who manage properties themselves failing to ensure the correct procedures have been followed, but also Estate Agents who are acting as Letting Agents as a secondary source of income are failing to keep abreast of all the legislation changes.
Legislation covering lettings is always changing and in the last 2 years we have seen so many changes that many agents are finding it difficult update their procedures so how can a landlord be expected to keep abreast of all the changes.
If you would like to discuss a current property you own that you have rented and are unsure if you have followed the correct procedures please complete the contact form found here: Contact Enquiry http://bit.ly/1TwlYDg
Existing landlords & new investors are still choosing Dunstable and Leighton Buzzard even deciding not to sell and to hold onto their properties instead.
The start of 2017 hasn’t seen a slowdown in activity and enquiries from landlords/investors looking to expand their property portfolios and many are targeting Dunstable & Leighton Buzzard for their next purchase. As well as new landlords and existing landlords looking to buy I have been surprised to have 2 landlords I didn’t know who each had a property for sale with offers on the table decide to remove them from the sales market and ask me to find them tenants instead. Both properties were good rental properties and having contacted me and done their sums decided that the rents now achievable made it a better investment to keep them instead of selling.
I have also been assisting 3 investors in the last couple of weeks looking to purchase their first property. By asking them to email me links to the property details they are considering buying I am able to give them both a realistic impartial rental valuation and also advice on the suitability of the property. For new investors some potential issues that can be picked up from marketing photos are overlooked.
One of the properties under consideration this week was a lovely 2 bedroom house in Dunstable. 2 bedroom houses are very sought after and this one came with the added bonus of a basement that had been tanked and was a useable extra room. The property is well presented and looks to have had some work done on it by the current owners including new central heating and also a log burner in the living room. This is a nice feature for a home owner but is also extra maintenance for a landlord. Strangely what did stand out in the living room was a plug in oil radiator under the window in the living room? It would seem that when installing the new central heating the owners have decided that a log burner was sufficient for the living room and didn’t have a radiator fitted. Log burners are a great heat source but not for everyday use and therefore they have had to supplement it with a plug in radiator. This is not suitable for tenants who will want a radiator in there so a potential extra cost and work would have to be factored in for our investor.
One of our other investors has been looking in Leighton Buzzard at a number of potential apartments as a first buy. Leighton Buzzard is very popular due to the train station and there are areas not too far from the station with potential investment properties, but there are some areas where the properties are of an age when storage heaters were common. Storage heaters can be an efficient way of heating a property but have to be managed so that the heat is stored and released at the right time. Many tenants do not get this right or do not understand the process and then issues arise when the property gets cold and they have to use alternative heating. With insuffient heating there is potential for the appearance of mould in unheated or poorly heated rooms. Unless an investor is including the introduction of new heaters for the apartment in their calculations and the redecoration required after removing the storage heaters I would advise against buying such apartments.
Speaking to new investors it is also obvious that they are not yet aware of several current and incoming regulations that could affect their portfolio and surprisingly many existing landlords are also unaware.
A recent report noted that Just 52% of respondents knew it would be illegal to let properties with an EPC rating of F or G from April 2018, while 17% weren’t aware of the changes. An Energy Performance Certificate (EPC) lasts for 10 years and if your current one was carried out a number of years ago any improvements you might have made to the property such as a new boiler, double glazing or LED lighting will not be reflected in the EPC unless you have the property EPC carried out again. Tenants are increasingly taking note of a properties EPC before choosing to view and the small cost of a new EPC could increase interest in your property. Also the cost of electric heating compared to gas heating has improved in the last few years and a property with electric heating and an EPC rating of F or even G is likely to achieve a higher rating now.
From 1 February 2016, all private landlords in England have been required to check new tenants have the right to be in the UK before renting out their property. In the same report 70% of landlords couldn’t correctly identify the penalties for failing to comply with Right to Rent regulations.
Right to Rent, which also applies to people who are subletting their property or taking in lodgers, was introduced in the Immigration Act 2014. Landlords who fail to carry out checks risk a potential penalty of up to £3,000 per tenant.
The majority were aware of the mortgage interest relief changes and the need for smoke and carbon monoxide alarms although I still receive a couple of calls a month from landlords who own properties and need clarification regarding smoke alarms.
What could happen to property prices in Dunstable and Leighton Buzzard in 2017 and could there be opportunity for investors?
Personally I feel it could go either way with many external factors such as the start of Brexit expected at the end of March and the beginning of the new tax changes in April this year.
Recently announced good news is that fewer homes were repossessed last year than in any year since 1982 helped by the continuing low mortgage rates. Figures from the Council of Mortgage Lenders (CML) show a total of 7,700 UK homes were repossessed last year compared with 10,200 in 2015.
A stamp duty surcharge on buy-to-let and second homes introduced last April contributed to the slowdown in central London, however Dunstable and other areas of the UK saw house prices continue to grow with Luton and Dunstable in the top 3 for house price growth nationally in 2016.
We still saw a number of new landlords coming to us last year despite anyone buying a home that is not their main residence having to pay a 3% stamp duty surcharge. This surcharge did lead to a burst of activity in March followed by a drop in transactions in April, but for the rest of the year the sales activity continued to grow.
Halifax have just announced that nationally house prices fell on a monthly basis for the first time in five months during January, however this is not been seen at a local level and the properties advertised by agents in Dunstable still continue to increase in price as London buyers favour the area and affordability.
There is a massive amount of uncertainty in the market right now. Many investors may start to sell some of their single let properties when they realise that their properties could start to become cash flow negative when the new tax changes come into effect in April this year.
Could this mean an oversupply of ex rental property available on the market for sale later this year? Quite possibly and maybe in some areas of the country property prices could fall as a result, but with the current strength of the Dunstable market this should only result in a slowing of the price rises we have seen last year.
The potential problem for renters is that a reduction in properties available for rent if landlords are selling will make it even more difficult to find the property they want.
Will this result in continuing rent rises? There is only so far that rents can go before it becomes unaffordable and we are currently at or very close to that point in Dunstable, Houghton Regis and Leighton Buzzard. The number of properties that we have seen having their advertised rent reduced on Rightmove and Zoopla is increasing so it is time for landlords and agents to be more realistic of their expectations when advertising a property.
For investors who are looking to purchase another property this year you might find motivated sellers deciding to sell due to the tax changes. I think it will be a great opportunity to buy property at discounted rates and buying from motivated sellers could be one of the most important strategies if you are looking to build your portfolio.
So far this year we have seen a number of tenants looking for property because their landlords are selling increasing substantially so keep your eye on the market as these ex rental properties appear or better still make yourself known to the local Estate Agents so that you are the first person they think of when a landlord decides to sell.
Dunstable average property price growth was 18% in 2016. Are we likely to see property prices continue to rise in 2017 ?
At last months Luton Property Investors Network (Luton PIN) meeting which had around 50 property investors and landlords many who had seen the recent Halifax report putting Luton in first place in the UK for house price growth in 2016, an article that put Dunstable in 3rd place for house price growth in 2016. Very pleasing for many of them who had made the decision to invest in these areas and the feeling from those investors was that Dunstable and Luton were still areas they should be investing in.
Since the beginning of the year I have seen an increase in the number of enquiries from investors who are looking to invest in the area, are in the process of completing on a purchase of an investment or have seen the recent report and have called me to discuss why we have seen such growth and if Dunstable is a good investable area.
It is also exciting to see 2 large developments in Dunstable that I highlighted in articles last year have now started on site.
One is a residential development with a LIDL supermarket on the Luton Road next to the BP garage as you approach Dunstable from Luton. The site which has been derelict for a number of years is full of heavy machinery as any existing buildings have been demolished and the site has been cleared and levelled. There was a slight mishap before Christmas when the workmen went through a water main cutting off the water supply to a large area of Dunstable for a number of hours. Hopefully they have now noted where that is !
The second site is behind the new Priory View development on Church St just after the Busway bridge as you enter Dunstable. Many might not have noticed anything is happening here yet but Persimmon Homes have started work on a very large site with planning permission for around 160 residential units although they did resubmit planning permission last year to increase this to around 300 units. There is a marketing suite already in place but not in use yet.
Work has started again this week on the old Woolworths site in Dunstable Town Centre, the Star & Garter pub which has been closed for a couple of years and recently was home to some raving squatters is going to be redeveloped and as also noted in one of my articles last year the derelict site opposite the Incuba building on Brewers Hill Road has had planning permission submitted for a development of around 60 homes.
This shows the confidence and demand that housebuilders are seeing in Dunstable making it an attractive location for buyers and investors from London and the local area.
Daniel Bourke is the owner of Belvoir Lettings Dunstable and in his previous career in Architecture he was an Associate in a leading London Architectural practice