August is traditionally the ‘silly season’ for news but notwithstanding this, we do have some news stories for you.
Fraudsters are always with us and we have a report here of a rise in cases where fraudsters are breaking into empty properties and letting them out.
The article describes several different cases and the agent, John Williams said
The problem is massive, and growing, although whether it is largely a London issue, I don’t know. However, it is certainly something that all agents should be alert to.
Typically, the fraudsters look for sales properties advertised on Rightmove, although in one of the cases we have experienced, there was no marketing on the portals and no For Sale board by request of the vendor.
The fraudsters seem to use local knowledge to look for empty homes, such as probate properties, change the locks, and advertise on Gumtree.
It has got to the stage where we are incredibly careful about marketing sales properties.
We don’t put up For Sale boards without explaining the risks to the sellers, and we always make sure the properties look occupied at all times, using automatic timers to make the lights go on and off.
Williams commented that the ‘tenants’ are usually innocent foreigners who are unable to produce the kind of paperwork which would get them through referencing adding
There is obviously a gap in the market to service this kind of tenant, who may have cash but no acceptable employment records. They have usually handed over money and signed what they believe are legitimate tenancy agreements.
The police usually tell them they must leave immediately, potentially adding to the homelessness problem
Fraudulent agent jailed
However, some progress is being made against the huge number of criminal landlords and fraudsters (who as Ben discusses here, are entering the sector due to poor enforcement which allows them to continue largely unchecked).
This is a story of Zhaker Darvesh who has been jailed for 23 months after admitting six counts of fraud in March last year.
Large fine for ‘membership club’
Then a company which posed as a ‘membership club’ to avoid tenancy laws has now been fined over £40,000 in a prosecution which is the first of its kind in the UK. This company was trading as the ‘Lifestyle Club’
As reported in the Guardian:
Last week the director of Lifestyle Club Ltd, Gian Paolo Aliatis, was required to pay £42,273 in fines, compensation and costs after pleading guilty to three charges of unfair commercial practice. In a prosecution brought by Islington Trading Standards in London, Aliatis admitted passing the lettings agency off as a membership club to avoid the legal regulations for lettings agents.
Under the law, tenants’ deposits must be refundable and paid into a tenancy deposit protection scheme. Aliatis admitted that his firm demanded a non-refundable “joining” fee. He also admitted pressuring customers into signing a “membership agreement” without giving them time to read and understand the document, and denying potential tenants the chance to view a property before signing. Rental payments were passed off as a “monthly contribution fee”.
Mind you this is nothing new. Ben has written about this in the past and I can recall being asked to advise another ‘membership club’ back in 2014 on their paperwork.
I didn’t hear much from them after I advised that their agreements were actually tenancies and that they needed to protect all their deposits.
General gloom and doom
There have been quite a few gloomy reports generally in the press just now.
The CIH Survey
For example, there are several reports of a survey which shows that almost three-quarters of people across Briain think that we have a housing crisis and that social housing is important because it helps people on lower incomes. Over half consider politicians are not doing enough about it.
Terrie Alafat, chief executive of the Chartered Institute of Housing which carried out the survey, said:
These results send a very clear message to the new government.
The housing crisis is real, and we are simply not doing enough. It’s clear that the British public supports more social housing.
We have called for a ten-year programme to build 145,000 affordable homes a year, with 90,000 of those at social rents. This would cost £12.8bn a year and would return spending levels to those under Winston Churchill in the early 1950s.
That programme would unlock billions of pounds of funding from the housing industry and add an additional £120bn to the economy each year through the creation of local jobs.
Much of this could be achieved by rebalancing the existing housing budget, which overwhelmingly supports building houses for sale. In the long run, investing in social housing offers great value for money.
The housing crisis is an economic, social and human catastrophe. But it can be solved.
The Negotiator suggests that our new housing ministers consider the report and the fact that housing worries are on a level with Brexit and also points out that NIMBY attitudes are declining.
You can read the report in full here.
RICS has warned the government that it must see the housing market as a complete entity and not just as separate parts. Pointing out that Boris Johnson’s new administration seems to be concentrating on homeownership, ignoring the fact that falling supply in the lettings market is set to squeeze rents higher, making life very tough for those unable to buy (which, let’s face it, is most people nowadays who are not already homeowners).
Simon Rubinsohn, RICS chief economist, said:
The latest RICS results will provide little comfort for the market with all the key indicators pretty much flatlining.
Landlords confidence at all-time low
Then the NLA’s latest survey shows landlord confidence to be at the lowest level since the quarterly survey began in 2006.
Richard Lambert, CEO of the NLA, said:
With the amount of change that has occurred over the last four years and now the proposal to abolish no-fault evictions without any certainty that the courts will be able to cope with the increase in cases this will create, it’s no wonder that landlords are pessimistic about their future.
Landlords need to be confident in their own businesses for the private rented sector to function properly.
Given that it’s expected to compensate for the lack of social housing, it is vital that this confidence is restored.
Agents expect to lose 30% of income
The Gloom and doom extends to letting agents as a recent assessment by PropTech firm Goodlord shows that over 90% of agents are predicting a loss of annual revenue as a result of the Tenant Fees Ban.
Of course, this is obvious as the whole point of the act is to stop agents charging fees to tenants. However, it is worth bearing in mind that if you do this, and take away a large percentage of income from a sector which has an important role in providing people’s homes, this is bound to have an impact.
Surprisingly though the article says the majority of agents remained upbeat. Maybe they are just trying to keep up their spirits.
The high cost of evicting rogue tenants
Organisations wanting to increase tenants rights might want to consider this post which indicates that the average cost of evicting a rogue tenant has reached £31,886 and takes nine months. The figure includes
- lost rent (£6,111),
- property refitting and redecoration costs (£22,775) and
- legal fees (£3,000)
If you are a small landlord with only one or two properties and not much other income, this could well push you into bankruptcy. Although you may survive if you have proper insurance. The real solution though is to take enormous care in choosing tenants so the rogues don’t get a tenancy in the first place.
Which means that the agent story above is worrying for landlords as agents’ falling incomes may mean that some will skimp tenant referencing work.
The Welsh Fees Ban
Don’t forget this comes into force on 1 September. Here is a post from the Negotiator which looks at how the Welsh fees ban differs from that in England.
Guidance from the Welsh Government is here.
- The NLA says the government is wrong when they say section 21 is the leading cause of homelessness
- Property Redress Schemes come in for ‘one-star bashing’ in Trust Pilot reviews
- Agent wins after challenging the council over an HMO penalty
- The government refuses permission for a controversial licensing scheme in Stoke on Trent
- The Government sort out their form 6A notices
Newsround will be back next week.