PROPERTY ARTICLE: Maintenance. Copyright SvD.

 

Maintenance

As a relocation agent I frequently hear horror stories from tenants about leaking taps that never get fixed, blocked toilets or broken down appliances that never get replaced or repaired. Many of these tenants end up leaving the property and falling out with their landlords.

First I should point out that many landlords and lettings agents do operate in good faith and have the interests of the tenants at heart. However like in every other sphere of life, there can be bad apples.

In the days that I used to manage properties (on behalf of the landlords), I can remember one particular tenant who was either very accident prone or just plain clueless – she managed to break a clothes dryer three times, flood her flat (and her neighbours below) by leaving the bath overflowing and block the toilet several times. The landlord was very accommodating until he totted up all the expenses he had paid out over 12 months on various repairs. From that moment on, the tenant was made aware that she would have to pay out of her own pocket for any further mishaps of her own doing.

Landlords are obliged to keep all appliances in working order and all plumbing and electrical appliances safe to use. However if a tenant causes the bath to overflow and floods the neighbours below, the tenant can be held liable for repairs. In the case of burst pipes (very common in our old buildings in London), the landlord will be able to seek relief from his insurers and if the property is part of a block of flats, for example, the building’s insurers will probably contribute to the repairs.

In the case of broken appliances, there is a rule of thumb that certain appliances such as toasters, kettles, vacuum cleaners should be replaced rather than repaired. It is not unreasonable for a landlord to refuse to replace an appliance more than once during the term of the tenancy. Furthermore, if the item was brand new at the commencement of the lease, the landlord can refuse outright to replace it. Common sense should prevail in all instances.

For larger appliances such as washing machines, dryers, cooking stoves and ovens, the landlord is advised to obtain a service agreement with the manufacturer. The originals of the appliance manuals should be left in the property so the tenant is aware of how to properly use the appliances. Normally the lettings agent is in charge of arranging the servicing agreements with the manufacturers or organising repairs of the appliances. The agent pays for these repairs from a small float left in their care by the landlord (or deducted at source when the agent collects the rent).

Finally, landlords should expect their lettings agents if they are managing the property on their behalf, to inspect the property regularly- at least at three month intervals. I recently did a viewing with a client at an expensive flat in Chelsea where the outgoing tenants clearly had an aversion to cleaning. In such a case, the lettings agent could have sent a cleaner round and charged it to the tenant plus insist that the tenant employ a cleaner to go in at least once per week. The outgoing tenants were obviously damaging the prospects of the landlord finding new tenants and were also in breach of the terms of their lease.

PROPERTY ARTICLE: Breaking a tenancy agreement. Copyright SvD.

 

Breaking a tenancy agreement

I was recently asked by a tenant to help them with a sticky dilemma. He had signed a tenancy agreement for 12 months but midway through the lease decided to move out and head back to the US. When the tenant had signed the lease he had been assured that the agreement contained a break clause at 6 months. Unfortunately the tenant did not check what they were signing and there was no such clause in the agreement. The tenant’s question was the following: if there was no break clause, are they liable for the rent for the entire 12 months?

The answer is YES.

Some landlords can be very accommodating and will do anything to keep a good tenant happy. Other landlords when faced with losing vital income will stick to the rule of the law. From a legal perspective the tenant is liable for the rent for the full term of the lease. i.e. 12 months if there is no break clause. Break clauses usually run at 2 at 4 meaning after four months the tenant can serve notice, that notice being two months. The landlord therefore is guaranteed 6 months rent in such an instance.

In the case of the tenant who approached me I recommended that he discuss the issue with his landlord and see whether he would agree for the tenant to find a replacement to take on the balance of the lease. The tenant asked around his circle of friends and colleagues and was able to find someone who needed a place to live albeit at a cheaper rent. After much wrangling the prospective replacement tenant agreed to pay what had originally been agreed in the lease and the landlord was happy with the arrangement. The outgoing tenant paid for all the reference and credit checks so was still out of pocket but in the end, it was a smaller price to pay that the full six months’ rent remaining on the lease.

I should close by saying that tenants should bear in mind that a tenancy agreement is a legal document. And once signed they remain liable for the rent and must comply with the terms and conditions set out therein. Tenants are advised to fully explain their requirements to the agent when making an offer on a property and should also ensure that they understand what they are agreeing to and signing. If in doubt, pay a solicitor to check the tenancy agreement on your behalf in order to be absolutely sure that the tenancy agreement has included all of your requirements and that you fully understand what you are agreeing to. Lettings agents tend to use standard agreements and do not have the legal nous to amend or change clauses. Tenants should request that any specific requests are listed on an A4 sheet and attached to the agreement as an Addendum of Terms. The Addendum of Terms then forms part of the tenancy agreement as long as it is signed and dated by both parties.

PROPERTY ARTICLE: Changes to Stamp Duty- Budget 2012. Copyright SvD.

 

Changes in stamp duty- Budget 2012

The Chancellor, George Osbourne, announced a new tax on properties worth more than £2 million when purchased through a company. This stamp duty land charge tax will add 15% to the purchase price of a property. And for individuals, a tax of 7% will be added on all properties purchased for more than £2 million. It is worth noting that a tax of 5% was added to properties worth more than £1 million just about a year ago. The figure has now changed to 7% and the threshold increased to £2 million.

First let us consider that these taxes are essentially disproportionate to the whole of the UK- in other words, the majority of properties worth more than £2million tend to be in the London area. Any estate agent will be quick to point out that the buyers who will be hardest hit are in fact the overseas buyers who make up the greatest proportion of buyers in the London property market.

There is a real fear amongst owners and sellers that their properties will in fact be devalued by the increase in taxes (the sums are significant-anyone buying a property for £2 million will automatically have to pay £140,000 in stamp duty). Prices therefore will need to be re-adjusted downwards to take into account these increases (or loss to the owner). Make no mistake, both buyer and seller could be the losers: even though the buyer must pay the stamp duty, owners could well be faced with lower offers as buyers discount the stamp duty from the asking price. As such, property prices could well suffer.

My own thoughts on the matter are not too onerous for overseas buyers who historically, in spite of increases in price or tax, manage to buy anyway. Their rationale is basically to sink their cash in the London property market as they consider it safer (and historically has proven to be in the long term) than any other investment vehicle. And let’s be honest- many overseas buyers consider the London property market less risky and speculative and buy ‘for their grandchildren’.

On a cheeky note I would add that overseas buyers are responsible for ‘capital flight’ whereby they see their money devalued in their own countries- example the Euro crisis and haemorrhage cash out of their own home turf and into London. There was a recent buying splurge by Italians and Greeks, supposedly, keen to avoid the crisis at home.

The real losers of these increased taxes will be the local UK population who will find it harder to ‘trade up’ to a bigger property and secondly, will have to weigh the pros and cons of paying a heftier stamp duty as well as inheritance tax (which at 40% is even more debilitating) upon death.

Many overseas buyers buy as investment and do not necessarily rent out or seek to obtain a return on their properties. In other words, many properties lie empty. This is a real shame. It is said that the lights remain out in most buildings in London every night.

Finally, those purchasers who reside overseas and register the property in the name of a company, will now be forced to pay a higher price for their privacy.

PROPERTY ARTICLE: Renting to students. Copyright SvD.

 

Renting to students

I do a number of student rentals well before the beginning of the university year in September/October. Typically the search begins from  even as early as April due to the fact that student accommodation can be very thin on the ground. Landlords, through bad experience alone, prefer to rent their properties to anyone but students. It is not unusual to ring lettings agents and ask if they will rent to students only to have the person on the other end give a whole raft of reasons as to why not or to simply say ‘no’ and put the phone down.

One of the main reasons students are so unpopular is that they have a reputation for trashing the place and being very slovenly in their housekeeping. However I am pleased to confirm that never has an Arab student I have placed in rented accommodation ever caused any damage whatsoever- this is clearly due to lifestyle and eschewing alcohol (and partying).

The good news is that there are landlords who will consider renting to students but only on the basis of the student agreeing to several requirements:

1.    References: foreign students cannot provide the key references that will impress the landlord that they will be able to pay the rent such as a healthy credit rating in this country. As a result, a landlord may demand that the rent is paid up front for the entire term of the tenancy. I would advise asking for a shorter term such as six months so that this demand is not too overwhelming (unless you can afford to pay a year in advance). If you do have to pay all the rent in advance, ask for a discount! Most landlords will offer an attractive discount on the basis of receiving all the rent in advance.

2.    Guarantor: if the landlord agrees to a student paying monthly or quarterly, they will most certainly require a guarantor to effectively guarantee rental payments should the student fail to pay. The guarantor will need to reside in this country and be able to provide an admirable financial history, i.e credit rating and money in the bank.

3.    A hefty deposit: landlords may demand a higher than usual deposit in the event of costly damage to their property. Instead of four to six weeks, they will likely ask for eight. This adds to the move-in cost but if the tenant keeps the property clean and tidy and does not cause damage other than normal wear and tear, they should receive their deposit back. Always insist on an inventory and a check-in where the student can be present.

4.    Proof that they really are students: lettings agents have a duty of care to ensure that prospective tenants are who they say they are. Students will be required to have a letter from their place of study confirming that they are enrolled (have been offered a place in a specific course) and have paid their fees to date. Students should have a copy of this letter to show when approaching lettings agents.

London is a very popular destination for international students and landlords do particularly value Arab students as tenants given that the vast majority are hard working and honest.

PROPERTY ARTICLE: Lease extensions. Copyright SvD.

 

Lease extensions

I’ve been asked recently by an investor to find him properties with short leases so he can snap them up at a cheap price, buy the freehold or extend the lease and sell the properties on at a profit.

Not so easy!

Given that the London property market seems to be bereft of ‘good deals’, i.e. there are very few, if any, properties available at knock-down bargain prices as the trend in London property has been to appreciate consistently despite the recession.

Investors are beginning to find short lease properties enticing but I would add a very big word of caution. Beware! Do get advice from a solicitor or surveyor in this area- known as enfranchisement (the purchase of the freehold). It is not guaranteed by any means that a freeholder will automatically part with his ownership of the freehold just because the leaseholder demands to buy it. The freeholder will more likely agree to an extension but on the basis that the leaseholder has owned the property for two years. (Under the Leasehold Reform Housing and Urban Development Act 1993, subject to owning the flat for two years, the leaseholder can force the landlord to extend the lease.)

Buyers should be aware that most leases on new build properties are 999 years and on most other leasehold properties, the term is 99 years. As time goes by and the lease becomes shorter, mortgage lenders will most likely hesitate or decline altogether to lend against a lease of less than 60 years. Hence one of the reasons that short lease properties are lesser in value – anyone who will require a mortgage may not be able to buy one.

However and again under the Leasehold Reform Housing and Urban Development Act 1993, the leaseholder is entitled to request an extension of the lease by the amount remaining on the lease plus ninety years. So say, 60 years remain, add another 90 and the extension will be for 150 years.

However the process of extending the lease can take several months and in some instances, more than a year. Be aware that the process is not swift. Also buyers should consider the cost of the extension and parting with a large sum of money which they are effectively sinking into the property. Investors considering ‘flipping’ (i.e buying to sell on at a profit immediately upon exchange) would be wise to calculate their profit margin accurately, if the cost of the extension is significantly high. I should add that even though the benefit of a lease extension can be transferred to a new buyer (by serving the landlord formal notice), in practice this is not always straightforward.

On the subject of purchasing the freehold – enfranchisement- the process is even more complicated. The main obstacle to enfranchisement is often the cost- the valuation process takes time (again a year or more is not uncommon). In order to calculate the cost of the freehold, the value of the land (today’s value) is calculated against the rent the freeholder could receive forever. A ground rent is usually levied on the leaseholder so if the owner of the freehold were to sell, he would need to know the value of the loss of the rent he would have received. I think you get the idea of how complicated the process can become!

Again there are many considerations when extending a lease or purchasing the freehold. It is absolutely imperative that prospective buyers obtain accurate and reliable advice for either a surveyor or solicitor who will be able to save buyers from unrealistic expectations in this domain.

PROPERTY ARTICLE: Why go solar? Copyright SvD.

 

Why go solar?

I have observed that many of the new build developments of apartments and houses appear to have solar panels on their rooftops. This is encouraging and shows that building companies are taking solar energy very seriously indeed.

There are good reasons to go solar:

Apart from the obvious reason of protecting the environment – fossil fuel power plants release harmful CO2 emissions into the atmosphere and contribute to pollution which in turn can lead to illnesses such as asthma or even in extremis, cancer. Solar energy is completely green and releases no emissions.  Once installed the system requires no maintenance so despite a one off initial cost, the system will pay you back handsomely with savings over the years.

Solar energy is also gaining popularity and another reason to invest in it, is to give our British industry a boost- there is much research and development still to be undertaken in the field of solar energy. Plus the actual manufacture of the panels could be done here in the UK. The solar energy industry in the US accounts for a workforce of 60,000. In Germany, which is a leading manufacturer of the technology, the workforce is in excess of 100,000.

I should explain here that there are two solar energy systems in use for residential consumption: thermal, which harnesses the sun’s rays to heat water and electrical (or photovoltaic, known as PV) which converts the sun’s energy into electricity.

It is possible to for solar energy to supply all of a household’s energy needs. This is probably the most exciting reason to go solar- why pay the electricity and gas companies when you can be self-sufficient for your energy needs?

You may even add value to your home by installing a solar energy supply - prospective buyers will be impressed with the eco-friendliness of solar plus the savings they will be able to enjoy.

Apart from the initial cost of going solar – which is high and averages around £6,500.-£8,500. for electric and thermal installation respectively for a two bedroom apartment (total cost for both installations will be around £15,000.), the long term savings outweigh the outlay involved in going solar.

A detached 6 bedroom house will require a greater KWh or supply of energy so the system will be more expensive and would average between £8,550-£11,500. respectively for electric and thermal installation. Please note these figures are ball mark and the final amount is dependent on the property structure, energy requirements and installation costs.

There are government incentives available to go solar-

Feed in tariffs for PV solar electric panels

The average income from this scheme is around £750 per annum. This income is derived from the guaranteed price you will be paid plus the savings you make and thirdly, you can sell the surplus of electricity that you produce to the National Grid. The price paid is 21 pence per KWh of electricity produced even if you use it yourself!

Feed in tariffs for solar heating panels

A Renewable Heat Incentive Scheme or RHU feed in tariff, offers 8.5p per KWh of electricity produced and provides a guaranteed income for 20 years.

It appears that the PV solar electric panels are the more popular as the incentives are more attractive. Do check with the council before installing solar energy either thermal or electric as there may be restrictions particularly if the building is listed. For leasehold properties you will need to check the Head Lease and you will most likely need approval from the owner of the freehold. The companies that install solar energy for either thermal or electrics will carry out their own survey as well prior to starting any works and will need to have sight of the approval before they commence installation.

PROPERTY ARTICLE: Serviced accommodation in London. Copyright SvD.

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Tenants: Have you considered Serviced Accommodation in London?

One of my favourite quotes is “Time waits for no man” and I think it encapsulates the glory of London; we live in a City where everything is possible as long as you hurry up!

Nothing could be truer that when looking at the property landscape in this great city of ours. Five years ago, serviced apartments in London were few and far between. My clients, who tend to work in the financial district or are diplomats, would send staff over to London and those staff generally had to find their own accommodation. Sometimes their search could take weeks if not months. Thrown in at the deep end and without having their bearings or knowing where to live, which agent to approach and most importantly, whom to trust, many employees ended up with a severe headache. As a relocation agent, I assist with sorting out the dilemma and presenting options that suit both budget and lifestyle. And given the chance, everyone would prefer the comfort of a home away from home, i.e a flat with all the amenities of an hotel but most importantly, a kitchen. Nearly always, my clients prefer serviced accommodation to hotels when they first arrive in London. And of course, may of my Arab clients prefer to cook for themselves and find serviced accommodation more practical.

These days, serviced accommodation has grown exponentially and is a high growth sector. The average spend for a small company in the Square Mile on employee housing (for expatriate staff) is around £250,000. Per annum. Do the math: if that spend all went to hotels, the number of nights would be far less than serviced accommodation. A standard room in a four star hotel is around £300. Per night. A serviced apartment from a reputable provider is around £200. or less depending on length of stay (typically, the price goes down after the first week) and the price includes many of those extras that would be chargeable in an hotel.

Serviced apartments can range from studios to three bedrooms. Some are very modern in style, others are more luxurious, many offer a 24 hour reception service and excellent security. Parking, if available, is usually charged per day at between £10-£20. Providers include in their rates as standard internet access, multi-channel TV, once per week clean, once per week linen change and in some instances, a welcome pack of basic food items to ensure that a weary arrival suffering with jet lag can walk in and kick off their shoes. Guests should note that service apartment providers will expect payment in full in advance unlike hotels who will wait until check out to settle the bill. This requirement of early payment is due to the high demand for these flats, which are booked back to back, and which is testament to their popularity.

Over the last three years I have observed a boom in the serviced apartment sector with more and more investors buying blocks of apartments in and around the City and West End and converting them to serviced flats. Plus there are now some really good, reputable providers who have honed their experience in this dynamic sector and who provide first rate service to guests. My own company benefits from great rates with many leading providers which I pass on to my clients. I only benefit from these rates though given the volume of business I give these suppliers otherwise to be fair, serviced apartments are in such great demand that they sell themselves.

The growth in this sector proves yet again that London is regarded as one of the foremost cities in the world to both the business traveller and tourist.