My Notable Property Person this week is Shona Davison, winner of the National Landlords Association Property Women Awards in 2009.

1. Please introduce yourself. Say a bit about yourself and your company

I’m Shona Davison, NLA property woman of the year 2009. As well as being a Sheffield landlady, I work as an analytical consultant building statistical models for credit risk or marketing departments.

2. How did you first become involved in property?

Nine years ago, I was a first time buyer, looking for a flat to buy in Wokingham, the area where I was living. After a long time of searching and one purchase falling through, I realised that my dream of home ownership was becoming increasingly unobtainable. The property market was booming so waiting and saving wasn’t an option. Prices were rising faster than my salary or savings.

I compromised by buying a buy to let in my home town of Sheffield, where prices were lower. The intention was to sell in a few years and use any profits to fund a property to live in. In the end, my boyfriend and I bought a house together so I never needed to sell my buy to let and that was the start of my career as a landlady.

3. What do you think is your greatest achievement so far?

I sold the relatively safe investment of my first buy to let flat and with the cash I released, I bought a much more risky property that needed a lot of work doing. I was stretching myself financially and had to work very long hours fitting the project around my full time job and planning my wedding. I felt a great sense of achievement once this project was finished, it was satisfying to bring a tired old property back to life and see three sets of tenants living there comfortably. The best part of being a landlady is when you go back to the properties once tenants have moved in and see them looking lived in and homely.

4. Do you or your company have any exciting plans for the future?

Currently no big property projects can be planned as I’m doing lots of hospital treatment to try and have a second baby. It took years of travelling up and down the motorway to have Pre-implantation Genetic Diagnosis (PGD) in London to get my first baby, who is now 1 year old. We are now starting the whole process again to try and get a second child. We have chosen to do PGD as I have a type of Muscular Dystrophy called Myotonic Dystrophy so having a baby naturally would mean there would be a 50% chance of the baby being born severely disabled.

As soon as PGD is successful (or we decide to give up) I will start thinking about the next property project. My husband and I would love to build ourselves a house to live in. I also want to expand my buy to let portfolio and would choose properties that need some work doing as I enjoy development projects.

5. What do you think are the greatest problems facing the private rented sector today?

Difficulty of obtaining credit is a big issue as it limits the possibility of expansion for many landlords. It is a more serious problem for those who need to remortgage but can’t because of lower amounts of equity or lower rents.

The amount of legislation has increased so much since I first became a landlady. It is essential to keep on top of it. I do this by being a member of the NLA, reading landlord websites and magazines and going to landlord meetings and conferences. The meetings are a good way of meeting other property investors, so you can learn from them.

6. What do you think are the greatest opportunities?

There are so many opportunities, that is why I love investing in property. Not only can you benefit from capital gains in the long run, you get the short term profit from the rent. I see my portfolio as my future pension, yet other than my first ever deposit, I have never paid any cash into it, only time and lots of hard work.

7. We have a general election coming up – what would you like to see in the winning parties manifesto as regards the private rented sector?

I’d like to see the idea of having a national landlord register scrapped. From my personal perspective a landlord register is an extra bit of legislation that may discourage new landlords from entering the market. Therefore as an established landlord who already does everything by the book it may be good for my business.

However, I can’t see how reduced competition and higher costs for landlords is good for the market as a whole, it will have a negative effect on tenant choice and that may feed into higher rents. I don’t believe it will help remove the bad landlords from the market as they already flout many laws so who is to say they won’t ignore this one too. If the register is going to be introduced as seems likely, then it needs to be enforced.

The use of planning laws for restricting HMOs is a bad idea. It will only lead to fewer landlords investing in HMOs which will push up rents for those people who use them.

8. Do you use social media (blogs, twitter, LinkedIn etc)? What place do you think it has in the future of the property industry?

Social media is a useful tool for marketing your business. I am a member of LinkedIn but don’t blog or use twitter. I use LinkedIn for my consultancy work.

9. What is the most important lesson you have learned during your time in property?

Property is not an easy investment. You have to be organised and flexible. It requires a lot of your time, which can be difficult to manage alongside a career and family, especially with the fluctuating volume of work it creates. Things such as tenants vacating and maintenance issues may all happen at once.

10. What advice would you have to someone thinking of entering the property industry today?

I would say “do it”! Be prepared for a lot of hard work and make sure you research all the legislation. I can’t stress enough how much you need the backing of an organisation such as the NLA if you are a novice, as you can then use their advice helpline.

You need to have a fairly laid back personality. If you are the kind of person who gets stressed when furniture gets scratched then you will not have an easy life as a landlord.

Don’t invest everything you have in property, it’s essential to have some savings set aside. They are necessary not only for unexpected repairs, but also for if a tenant stops paying their rent or other unexpected costs arise. Having cash in the bank gives you time to respond to the crisis.

*******

Thanks Shona, and good luck with the PGD. You are an inspriation to us all.

The NLA Property Women awards are a great idea and I hope lots of people apply for the 2010 awards – there is still time, but nominations close at 12 noon on Monday 12 April 2010. Anyone interested will find more information and the forms here.

As everyone involved in the private rented sector should be aware, tenancy deposits taken for assured shorthold tenancies now need to be protected with a government approved tenancy deposit scheme.  All schemes are required to provide a free arbitration service, in the event of a dispute regarding deductions from the deposit at the end of the tenancy.  The tenancy deposit regulations came into force in April 2007.

The authorised tenancy deposit scheme companies

We have three government authorised tenancy deposit companies and three methods of charging:

1. The DPS are free to everyone, their running costs are met from interest on the deposits they hold

2. My Deposits charge a joining fee, an annual membership fee, and a fee per deposit protected (which, for landlords, is cheaper if done online).  The basic fees for agents are more expensive, but agents can get significant discounts by pre purchasing blocks of protections

3. TDS (confusingly standing both for The Dispute Service and Tenancy Deposit Scheme) charge agents an annual flat fee which varies depending on the organisation regulating the agent and the number of tenancies registered at a specific date in the year.  There is a sliding scale of discounts for firms which have generated few or no disputes.  The fees for landlords are, we are told, calculated on an individual basis.  Only agents who are regulated by specified organisations (ARLA, NAEA, RICS, NALS and the Law Society) are permitted to be members.

Problems with TDS

As most people in the private rented sector are aware, there have been a number of high profile problems with the TDS model which has necessitated changes:

• In January 2009 they withdrew membership from unregulated members, a move apparently forced on them by their insurers who had taken some heavy knocks from unregulated agents going bust.

• Last December they were reported to be dramatically reducing the number of adjudicators used

• This year agents have been rocked by massive hikes in their annual charges.   This, we are told, is mainly due to the large number of disputes being generated, sometimes it seems  for ridiculously low sums.

Comments on the TDS fee increase

As can be imagined the fee increase has caused considerable hardship for many agents.  TDS somewhat glibly say on their site:

TDS was designed specifically for regulated agents and corporate landlords. We are confident that it remains the cheapest insured option for deposit protection for the majority of its members.

However many of their members may beg leave to differ. For example see some of the comments on this blog, such as those from:

• Kevin Burge, whose firm rent:cheltenham is a licensed ARLA agent which referred no disputes to arbitration, but which have had their annual fees increased by 23%, and who has big criticisms of the dispute system

• An anonymous commentator from a licensed ARLA firm, who reported that they had had 1 dispute for every 187 tenancies and have had their fee increased by over 1,000% (and say TDS refuse to say how this was calculated)

• Jonny from David Martin Estate Agents, who reported that his firm had about “350 deposits registered, 3 disputes and the fee is going from £583.00 to £3400.00″.  A charge effectively to them of £939 per dispute, and

• Natalie from Temples, a NALS agency, who reported that her firms fee had increased from £818  to £3206 based on 274 tenancies and 1 registered dispute.  She pointed out that the dispute was over a £150 cleaning bills which the tenant had insisted on challenging and which had been found in favour of the landlord (who was therefore justified in refusing to settle).  However it seems that her firms is now paying the price of some £2,388 for this!  Again she reports that TDS have failed to explain the reason for this 292% increase (based it would seem on the one dispute).

The fee increases have even been the subject of questions in Parliament as this exchange on 23 March shows.

Grant Shapps:

To ask the Secretary of State for Communities and Local Government whether his Department’s contracts with tenancy deposit scheme providers provide for it to intervene to prevent an increase in the level of fees charged by a provider.

Mr. Ian Austin: The Department has no role in the level of fees that the tenancy deposit scheme providers charge their members. Any increase is a commercial decision for the scheme providers.

What about moving to another tenancy deposit scheme?

Not surprisingly, many agents are now thinking of moving to one of the other two companies, although the commentators on my previous post were apprehensive about the cost of this and the extra administration.

However, in the last few days, My Deposits have reported  that Countrywide Residential Lettings, the UKs largest letting agent, has moved to using their service with effect from 1 April 2010.  Quite a coup!

MyDeposits now publish a special Q&A pdf download on their website setting out answers to frequently asked questions.  This is very interesting, particularly Q18.:

Unlike TDS, we require the main correspondence address of  the landlord (we do not accept ‘C/O’ addresses or PO Boxes) so that we can explain to them the principles of the legislation and what penalties they face if you, the agent, fail to protect the deposit or have your membership cancelled. If you do not wish us to contact your landlord for this purpose then we regret my|deposits is not suitable for your needs.

We undertake annual fraud and financial credit checks on all our agent members including the request for evidence of segregated client money accounts and balances within these accounts that match the level of deposit protection we provide. Failure to provide this evidence will invalidate membership.

It does seem, as they are not shy of stating, that My Deposits charging model is more robust than that used by TDS.  My Deposits were always intended to be the ‘landlords tenancy deposit company’ and state in their Q&A that at present that they have approximately 50,000 landlord members to 3,000 agent members.  However this may change.  Most letting agents have gone through a very tough time with the credit crunch and are not in a position to easily absorb cost increases of 23% let alone 200-1,000%!

The ‘free’ DPS service is often not favoured by agents, as they prefer to hold the deposits in house, partly because of the interest income, and partly because it is easier for them administratively.  However for those considering changing Kevin First of the DPS, comments

DPS does now offer bulk uploads – if you email the scheme we will send you the template. It’s very straightforward, you just download your tenancies into the template and send it back to us with your DPS Agent ID and we will upload the data into your account. Once you have transferred the cash all deposits will become active and deposit confirmations will be emailed to all parties – so there will be no gap in protection.

What are  your views?  Are you an agent with TDS?  How do the increases suffered by your company compare with those citied here?  Are you considering moving and if so will you go to My Deposits or the DPS?

(With thanks to everyone who commented on my previous post)

1. Please introduce yourself. Say a bit about yourself and your company

My name is David Salusbury and I am Chairman of the National Landlords Association (NLA). The NLA is the leading organisation for private-residential landlords. We campaign for the legitimate interests of landlords by seeking to influence decision-makers at all levels of government and by making landlords’ collective voice heard in the media. We also seek to raise standards in the private-rented sector while aiming to ensure landlords are aware of their statutory rights and responsibilities.

2. How did you first become involved in property?

Like many landlords, I inherited property from my mother who was a landlord on a small scale in Kingston-upon-Thames.

3. What do you think is your greatest achievement so far?

I would like to think that I have had some part in creating a national representative body for private landlords that is run professionally and recognised as an authentic contributor to the national housing debate. In that way, the NLA could have a positive influence on the development of the private-rented sector.

4. Do you or your company have any exciting plans for the future?

As part of our drive to raise standards we are developing a landlord accreditation scheme which will need no funding from local authorities or central government. We have plans for moving further towards creating one, unified voice for landlords at the national and – increasingly – at the European level.

5. What do you think are the greatest problems facing the private rented sector today?

The central issue is how to drive out the rogue landlords while avoiding making life even more difficult for the vast majority of landlords who are reputable and honest. We must also bring cohesion and consistency to the huge amount of regulation affecting the letting of private residential property. In the shorter term (hopefully) something must be done about the lack of mortgage finance which is crippling landlords’ ability to manage their portfolios.

6. What do you think are the greatest opportunities?

It is probably a truism that investing in property has for many years been, and remains, one of the few means of accumulating capital in Britain. Given the increasing importance of the private-rented sector, I would say to most people contemplating becoming a landlord ‘give it a go’, but ensure you are up-to-speed with all the requirements. It may not be rocket science, but it is a responsibility that shouldn’t be taken lightly!

7. We have a general election coming up – what would you like to see in the winning party’s manifesto as regards the private rented sector?

Before any more regulation there must be a commitment to a thorough review of existing legislation to see what is no longer needed. We would very much like to see the Government persuading local authorities to improve their expertise in the private-rented sector and to encourage local authorities to focus their enforcement activity on the rogue landlords within their area.

8. Do you use social media (blogs, twitter, LinkedIn etc)? What place do you think it has in the future of the property industry?

The NLA does, yes. We believe their importance should not be underestimated.

9. What is the most important lesson you have learned during your time in property?

That the business principles of courtesy, cooperation and cheerfulness are pretty good starting points for any activity. It’s not always easy, but one has to start somewhere.

10. What advice would you have to someone thinking of entering the property industry today?

Research, research, research. Once you’ve decided to take the plunge in letting residential property, join the NLA and make full use of the advice, information and support on offer. Then use the NLA’s benefits and services to the full to help you make a success of your lettings business. And do not underestimate the time and energy needed to be not just a good landlord but a great landlord.

However the surprising piece of news is that the legislation will be retrospective   So all tenancies where the rent is between £25,000 and £100,000 on 1 October 2010, on the day the changes are scheduled to come force, will change automatically into ASTs at that time.

There are two main consequences following on from this:

• All landlords of these tenancies who have taken a deposit, will need to ensure that it is protected, or they will be in default, and

• The procedure for evicting tenants will then be the procedure laid out in the Housing Act 1988, so you will need to serve a section 21 or section 8 notice first (not a Notice to Quit as now).  Note also that the forfeiture procedure, currently available to ‘common law’ landlords, is specifically prohibited under the Housing Act 1988.

I have not had an opportunity to see any of the delegated legislation setting this up and will do a further blog post once I have more information.  Many thanks to the NLA for keeping me informed.

David Salusbury, Chairman, NLA, said:

“Although we are still piecing together the facts, the retrospective nature of this change is highly regrettable, and it could have a wide-ranging impact on the letting of private residential property. For example, landlords in this higher rent bracket will have to protect deposits for the first time. If they fail to do so by October 1 2010 they could be in breach of the law. We are told the courts are being forewarned.

“The NLA believes the Government is rushing through this change without fully thinking through the consequences.  We call for greater consultation to ensure this measure does not have a negative impact on the private-rented sector. We will continue to provide the most up-to-the minute help and advice on the issue to landlords and have published a guide to help landlords comply with the law. The NLA will continue the press the Government for further consultation.”

Watch this space!

You can read the news item here, and the report itself can be downloaded from here.

This follows on from the consultation document published in the summer, which I wrote about here.

The CLG on their news page set out a list of new measures, and I copy this below, with a few comments from myself and others.

However everything needs to be read in the light of the forthcoming election (believed to be taking place on 6 May), which many people consider is most likely to be won by the Conservatives. The government therefore have limited time to get things done, and much of this list therefore should be considered just as a statement of intent, should Labour stay in power.

“Funding for a new housing hotline offering free help and advice for private tenants should things go wrong”
This would I am sure be very welcome to tenants. However would it not be more cost effective simply to provide more funding to the existing organisations who already provide help to tenants, such as Shelter and the Citizens Advice Bureau?

“An online word-of-mouth directory of landlords similar to tripadvisor or mumsnet.”
I suspect that this suggestion will not be popular at all with landlords, although vote wise, there are more tenants in the country than there are landlords! See also the NLA comments below. It is most unlikely however that anything like this can be set up before the election (so landlords are safe for a while).

“A requirement for written tenancy agreements”
This was of course suggested by the Law Commission in their report, years ago. The Law Commission took the view that there should be prescribed forms of tenancy agreement setting out all the relevant law, which should be in plain English. They also recommended penalties for default.

The government paper states that prescribed forms of tenancy agreement are being considered, but goes on to say that more work is needed before a decision can be made. This probably means that nothing much will happen before the election.

“An increase of the short-term rental threshold from £25,000 to £100,000 a year.”
This has been on the cards for a long time, and of all the announcements made, this is the measure most likely (indeed it is virtually certain) to come into effect. The report states that ‘subject to the availability of Parliamentary time, we plan to lay a Statutory Instrument changing the threshold to £100,000’ which would come into effect on 1 April. Landlords of high rent properties should therefore start considering which tenancy deposit scheme they will be using after that date.

“A National Register for Landlords to help tenants make basic checks on their prospective landlords. Councils will be able to identify local landlords more easily, making enforcement of letting rules easier, and registered landlords will gain access to the latest advice and information on what their role entails and how best to fulfill their responsibilities”

The proposal for a register has been vigorously opposed by many landlords ever since it was first suggested. The government report however states that they are ‘committed to the establishment of a National Register’, and that they are now clear on the firm proposals for the its basic operation, which are as follows (and I quote):

• A national register run nationally
• Compulsory for all landlords (defined as those letting a property on a tenancy agreement – this excludes leasehold, resident landlords and holiday lets)
• Basic information required on registration will be name (plus date of birth to ensure uniqueness), contact address, address(es) of property for rent
• No further information will be required and there will be no hurdles to registration
• There will be a registration fee to cover administration costs
• Registered landlords will receive a unique registration number which will be a prerequisite to key landlord activities
• Failure to register will be a civil offence attracting a cash penalty
• Compliance will be enforced through the two elements set out above backed up by extensive national publicity focused on both landlords and tenants
• On registration, landlords will receive a “starter pack” containing information about their rights and responsibilities and helpful links to other organisations.
• Similar information for tenants will also be made available as part of the Register website
• public enforcement agencies will have access to the full data. Landlords will be able to access their data (using their unique registration number). Tenants will be able to access current or prospective landlords’ data (using the relevant landlord’s unique registration number and, therefore, only with permission from the landlord)

However there are a lot of other matters relating to the Register which he CLG are still unsure about. So it is possible that this also may not make the statute book before the election.

Needless to say, the National Landlords Association is deeply unhappy about the proposals:

“At the same time as having to provide more accommodation in order to plug the housing gap, landlords are also now expected to be on a register, declare the addresses of their rental properties and also have feedback (whether true or false) posted about them on the internet. Where is the incentive for landlords to develop their housing provision in today’s proposals? And how exactly do these administrative functions actually improve the quality of rental property?”

Better regulation of letting and managing agents
This is very welcome and long overdue. Many of the problems encountered by both landlords and tenants stem from inept (and occasionally downright dishonest) letting agents. Good agents (of which there are many) will also welcome this, as it will root out the bad agents who, most unfairly, give them all a bad name.

These are what the government report says are the key principles and characteristics which should underpin the new regime (and I quote):

• A separate regime from estate agency.
• Should cover all letting and managing agents, including landlords who manage properties on behalf of other landlords, and those managing long leasehold properties. Should not cover landlords managing their own properties.
• Self funding through fees paid by agents to join
• Must contain the following elements:
  • A clear mechanism by which consumers feel confident that they will get a fair hearing if they complain
  • The ability to provide redress, where appropriate
  • Non-negotiable and enforceable safeguards to protect client money
  • Hurdles to entry ensuring agents conform to basic standards including basic levels of knowledge and expertise.
  • Enforceable undertakings around the quality of stock let and managed by agents (including energy efficiency) and the fairness and transparency of fees
  • The ability to impose sanctions

The CLG report also sets out proposals for accreditation and for creating Local Letting Agencies.

There are a lot of good things in the report. Personally, although I know it will annoy landlords of high value premises, I think that the increase of the AST rent limit is well overdue. I also think that a requirement for all landlords to give tenancy agreements is a good one.

So far as the Register is concerned, I can see many advantages to it and can certainly see why it is attractive to government. For one thing, it will enable them to have a much better understanding of how many landlords there actually are, so they can plan accordingly.  I can also sympathise with landlords though, and there may perhaps be some human rights implications if they are forced to make make public what which many landlords consider to be private information.

It could also end up being an expensive waste of time. Professor Martin Partington in a talk which I reported here was of the view that ‘light touch’ regulation would either be ineffectual or not ‘light touch’. We will have to see.

The NLA however is steadfast in its opposition, to what it believes is the wrong approach to the problem of rogue landlords:

“The NLA has said again and again that we do not need further regulation which over-burdens the overwhelming majority of good landlords. However, we recognise the desperate need for local authorities to better use existing powers to drive up standards and root out rogue operators. Once again, we call on councils to devise strategies which target rogue landlords without penalising the law-abiding majority.

“For many landlords today’s announcement when combined with last week’s proposed changes to the planning regime surrounding Houses in Multiple Occupation (HMO) will not make for good reading. Very little of what we have before us recognises the value of the majority of good landlords who work tirelessly in the provision of decent and affordable housing solutions. Landlords could be forgiven for thinking that this latest round of measures is little more than landlord-bashing by the Government.”

The British Property Federation is also critical

The government risks alienating the UK’s one million plus private landlords with pre-election showboating policies that overshadow the desperate need to encourage investment in the sector,

Going on to say

“There is a growing mood of hostility towards registration amongst landlords. We will defend landlords’ interests robustly on any legislative proposals because past experience has shown that policy theory often ends up being indiscriminate in practice. It is important that any new measures target the rogues whilst being fair to good landlords. Decent landlords are up for raising standards, but do not believe the current proposal for landlord registration is true to the Rugg Review vision of a simple and well-enforced scheme.”

It will be interesting to see how much of the program set out in this paper makes it to the statute book before May 6th, and if the Conservatives then take over government, how much of it will survive the change.