Despite the fact that buy to let landlords are catching up on their repayments according to the Council Of Mortgage Lenders, Bradford and Bingley are still looking in very poor shape.

According to a recent article in The Telegraph, the state owned mortgage lender posted a horrific loss of one hundred and sixty million pounds in just the first six months of this year.

This is the first time that the true extent of the trouble faced by Bradford and Bingley has been known as despite the fact they were obviously floundering they posted a one hundred and thirty million pound profit last year.
This was due to the sale of 197 branches to the Abbey and also the selling off of its 20 bn deposit book. Now it is easy to see why these measures were necessary.

The losses faced by this group are largely no threat to the tax payer because of the fact they will largely be borne by the financial services compensation scheme under terms agreed at its nationalizsation last September.

The fact that the organization has posted bad debt figures of 328 million in the last six months is cause for comment though as you have to ask how such a terrible and one would think irreversible  situation was allowed to occur in a lender that had years of trading experience.

The Council of Mortgage Lenders, CML, have released their latest report on the state of play in the property business and it has to be said that things are looking much rosier than many would have predicted.

The report finds, among other things, that the number of landlords behind in their repayments has significantly improved.

Loans in arrears of three months or more fell to 29,400 or 2.49% of all buy-to-let mortgages, down from 35,600 or 3.06% in the previous quarter. As well as that, 21,600 new loans were given out during Q2, up 5% on the previous three months.

Rob  Thomas,  a senior figure at CML had this to say “So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates.”

It is interesting to note that far fewer remortgages were taken out as landlords opted to stick with the lenders variable rate rather than locking themselves in at this stage.

Let’s hope that these exciting figures continue as it appears that landlords who have really felt the tough times with everyone else seem to be making a strong and welcome recovery. As well as being good for the buy to let market it can only be a positive sign for the economy as a whole.

Exact Mortgage Experts claim that it was revealed this week that fifty four percent of brokers believe the FSA should step in to regulate the buy to let market.

It is also being said that figures show a large number of mortgage brokers say that two thirds of their clients, who are buy to let landlords, are amateurs in the property market. It seems many are equating this amateur status with a need for more serious regulation in this sector. It is sensible to assume that those with less experience may require a more hands-on approach and extra guidance.

Alan Cleary, managing director of Exact, has this to say on the issue:

“The ready availability of mortgage finance and credit up until two years ago opened the door for a lot of amateur investors…The lack of regulation meant it was too easy for amateurs without a commercial head on their shoulders to jump on the bandwagon…It was a mistake to assume that because buy to let was viewed as a commercial endeavour, it could be left unregulated. The number of amateurs landlords in the private rented sector with sizeable portfolios now well under water is proof of the fact.”

It seems to me that FSA regulation, so long as it is not too intrusive, may be a good idea for this sector of the market. It should provide guidance and protection for everyone concerned including the landlords themselves.

Since April 2006, there has been a requirement for landlords to register any properties that are over three stories and house more than four tenants that are not related. At first, this law seems a bit arbitrary but on closer inspection of the way housing tends to work it is obvious that the law is designed to protect the more vulnerable members of our society that are sometimes forced to accept overcrowded and substandard accommodation.

In the past few months, two landlords have failed to obtain the necessary license and have been prosecuted because of it. I fully stand behind this move. There is little point in bringing in new laws if they are toothless because they are never enforced. In these cases the gentlemen involved have both been fined a substantial amount of around ten thousand pounds and, in my opinion, this should serve as a reasonable deterrent.

I applaud the sentiments of the housing minister on this one when he is quoted as saying:

“I am committed to driving up standards across all forms of housing in this City and to make all rented homes safe and decent for tenants…I am determined that landlords comply with the basic requirements of the licence conditions to ensure tenants live in a safe home. We are working closely with landlords in Birmingham to raise standards of their housing but will have no hesitation in enforcing the law and recommending prosecution of landlords who blatantly flout the law.”

Let’s hope that is exactly how it works out!

The NLA has issued a reminder to all landlords involved in sale and rent-back practices that their window of opportunity to register with the FSA is fast running out.

In a timely warning the National Landlord Association have told landlords they must move fast to make sure they are operating in legal manner. The new regulation will pull this previously under-regulated group into line to ensure that all customers are getting a fair deal. Once sale and rent-back becomes a regulated activity, people who use this system will have to prove that they are a fit person to be involved in the business.

Other things will be regulated as well, such as making sure that an agreement that is realistic and fair has been reached regarding how long the owner-cum-tenant may stay in the property. Claims of people being able to stay in their homes for life have been proven to often be wildly exaggerated and have created false expectations in the people entering into the sale and rent-back agreement.

Regulation should bring this form of landlord activity into line and, as I have expressed on this blog before, used properly, this sale and rent back type scheme could be a winner for all concerned. It is good to see the FSA acting quite promptly to drive the rogues out of this area and ensure that things will now be much fairer.

It is really not surprising with the state the economy is in and the number of people being made redundant, but it has been reported this week that two thirds of landlords claim that there has been a sharp rise in people defaulting on their rent over the last six months.
 
Unemployment is now at its highest level in this country since 1995 and is predicted to rise even further, all of this is going to contribute to tenants having difficulties meeting their responsibilities, including paying the rent.

It is easy to be sympathetic towards people that suddenly find themselves in serious financial difficulties, but the truth is that landlords need to avoid joining them in the mire by stepping up their tenant vetting procedures. It should be a matter of course that you run a comprehensive credit check on prospective tenants but in this era it is probably best if you extend that to checking past landlord and employer references as well.

It is a good thing to remember that if you are using an agency, they should be offering you all of these services as well as a rent guarantee and, if they already do, now is the time to check what the guarantee actually covers you for.

Ideally you should be looking at loss of rent plus legal costs being covered whatever the reason for default.
 
These are certainly hard times for a lot of people but you should try to protect yourself against rent difficulties at all costs; it is a sad fact that no matter how hard times get, it is not up to private landlords to provide free or subsidised places to live for the needy. We pay our taxes so that others can take care of that.

This week there was an announcement of a service that will have landlords jumping for joy!

Someone has finally put up a website that allows landlords to check if a potential tenant has ever been reported by a previous landlord for skipping out on rent owed.

SureRent, is a website that will let landlords browse through a comprehensive list of tenants that have dodged rent in the past. In many cases, the site will report the exact amount owed to the previous landlord and in some cases will even allow landlords looking to rent to that person to contact the previous landlord to discuss the circumstances.

This is something that has been missing in the property rental business and it will be welcomed by the majority of landlords, most of whom are simply trying to find tenants that will stick to their end of the deal and pay their rent in a timely fashion.

It is also a bonus that the previous landlord will be contactable because we all know that sometimes circumstances are not what they seem, especially in this present financial climate. It would be sad to see someone totally blacklisted for a minor and isolated infraction if the situation did not call for it.

In the meantime perhaps the agencies involved in paying benefits could consider their role in unpaid rent situations. A return to paying rent straight to the landlord could improve things immeasurably.