We have had some divisive law changes in the private rented sector over the years but the latest one handing a lot of power to local government is one of the most divisive yet.

I am aware that the RLA have waded into the argument full force and I agree with a lot of what they say but in the interests of fairness I want to air both sides of the argument in two blogs.

For those of you who are unaware a law came into being on October 1^st that dictates that local goverments have the power to insist on planning permission being obtained when a landlord wants to let to 3 or more unrelated people. To be fair this is a concession on what the labour party had planned, under their law landlords would have to have applied in every area regardless of demographic.

The RLA’s argument is that not only is this a bureaucratic nightmare it is also on the thin edge of the wedge in terms of social engineering.  Chairman of the RLA puts it like this:

“Planning law has always controlled building use, not the relationship between the people who may live there. But now, if a shared house or flat is rented to a single person, or a family, a landlord loses the future right to rent it again as a shared house – without obtaining planning permission.”

And on the social engineering issue he adds:

‘we feel is a dangerous use of planning legislation to dictate who is allowed to live where. ‘

It is clear that the RLA is not happy and I think their position is clear. Next blog I want to look at the motivation of the government in bringing in this new law.

The RLA (Residential Landlord’s Association) are not happy with the new law allowing local government to force them to obtain planning permission to rent a property to three or more unrelated people, in certain ‘problem’ areas.

So what is the government’s thinking, what is motivating them?

They say this “(the government) also understands the concerns of residents who see their neighbourhoods being overrun by HMOs(houses in multiple occupancy) and the significant impact this is having on their quality of life.”

The bottom line is there are pockets where so many HMO’s are causing a problem for other residents. The types of places being complained about are often (not always but often) student areas and the residents complain of high noise and littering levels. The government may not be saying so directly but their aim is to prevent student slums from forming.

I understand the concerns of residents, I really do. But I cannot help thinking the government is taking the easy way out. There are already laws against littering and high noise levels. Surely the way forward is to enforce them?

It troubles me that I see this occurring a lot in Britain at the moment. Instead of enforcing current laws we just create new ones.

More police anyone?

As most of you are probably aware recent legislation change means that the annual rent threshold for common ‘assured shorthold tenancies’ is now raised from £25,000 to £100,000.

This in itself is newsworthy but it is the fact that the legislation back dates the legislation that seems set to catch landlords out if they are not on their toes.

The bottom line is that the change drags many more ‘high end’ properties under the tenancy deposit scheme. Not just those that are rented after the Oct 1 change to the law but also those that were rented between the dates 6 April 2007 and The Oct 1st change that occurred this year.

Therefore those of us who have been happily operating properties of up to £100 000 without securing the tenant deposit within the scheme now fall foul of the law. It is imperative that all landlords remedy the situation as soon as they can.

In the meantime prominent landlord groups are arguing that the retrospective legislation is a legal minefield. They are calling very strongly for the law to apply only from the date it was officially introduced.

A seasonal warning is due to all students looking to rent property, especially if it is their first time in the waters of rental property.

As has been discussed on this blog before most landlords are fair and just. But as with all sectors, it has its fair share of shady dealers. And students, young and often desperate having left things to the last minute, can be their favourite prey.

This is especially true this year as the supply of rental property is low and students are likely to have a harder time finding things in their budget. An example of the sort of thing that goes on was recently exposed on the Gumtree website. A scam involving fake landlords asking potential tenants to send them money for non-existent accommodation was uncovered but not before it had claimed some victims.

A lot of these fake landlords claim to be members of the NLA (national landlord’s association) and even go so far as to forge letter heads with that claim. My number one tip to avoid scammers is to check that claim.

Go to www.goodlandlord.org.uk and enter the landlord’s details. If they have not given you a valid UK address to allow you to run this check then that is your first clue to have nothing to do with them. They are required to do that by law.

Most of us learned some lessons during the last recession. Even those of us who are seasoned and experienced landlords felt the sting of the collapse and we would all be silly not to heed the warnings we were given.

It is a rare landlord indeed that can claim to have remained untouched. If it was not a huge drop in property prices at the wrong time, it was reduced opportunity for bank funding or exposure to rental arrears as tenants hit difficulties.

There is no doubt that with demand now bigger than supply for rental properties, things are looking up for landlords but most are proceeding with caution. And that is only fitting.

As Graham Kinnear, MD at Landlord Assist points out the idea of infinite property price rises has been stripped away from us.

 “Prior to the credit crunch lots of people bought in to the idea of ever increasing property values and many landlords expanded their property portfolios quickly with the assistance of excessive bank lending. However during the height of the recession many were exposed to price falls on their property, in some cases wiping out any equity they had. “

Landlords will no doubt still expand in favourable conditions but the urge to protect themselves from the inevitable down times is now much stronger. The motto seems to be full steam ahead; with caution.

The big story in our sector at the moment is the fact that demand is outstripping supply and sending rental prices soaring.

It is a fact of life that when supply of something gets low, prices get high. It is not as if enough people did not predict this day arriving. Experts have been theorizing that the supply of properties for rent was going to get dangerously low for at least 6 months now. And it appears it has come to pass.

According to the latest figures demand for rental properties is up nearly fifteen percent in August: in stark contrast properties available has dropped by fifty percent. The inevitable has happened and rental prices have risen.

Make no mistake; landlords have been on the other side of this equation and in recent times too. There was period there where rental properties were in such oversupply landlords were making a loss on renting out.

There is bound to be some profiteering as that is the nature of some humans but it is my fervent hope that most landlords, while taking advantage of the change in fortunes, play fair with their prices. Just because you can charge ridiculously high prices, genuinely does not mean you should. Not in my opinion.

My experience though is that most landlords do have a social and moral conscience. 

We have talked a bit recently about the high demand for rental properties and the fact that there is starting to be a shortage. Also that many people are choosing in uncertain times to rent instead of buy only adding to the supply and demand imbalance. Recently it seems middle class families have been looking at another solution.

Many people in larger properties have decided to take in lodgers. Apparently this is happening in numbers that have not been seen since the middle 1960’s.

It seems the demographics for people willing to take in lodgers has changed a little since then with the primary candidates now being young couples with or without children. They are choosing to open their homes to lodgers mainly in order to relieve financial distress.

While this situation seems to be a perfect partial solution to the worries of both home owners and renters it needs to be pointed out that many of these landlords are totally unaware of the responsibilities of the situation they are taking on.

I applaud people’s initiative in taking action to ease their circumstance but urge all landlords to undertake extensive research to make sure they are aware of all laws pertaining to what they are doing.

Landlords will no doubt be accused of taking advantage but personally I can see no blame for some landlords trying to recoup their losses after a very tough few years. Figures indicate that in most parts of England rental prices have risen.

But before people start jumping up and down it is timely to remember that rental prices had fallen significantly recently and this could be considered a re-adjustment to normality.

The increase is due, as it tends to be to demand. With the banks refusing many first time buyers funding and reluctantly landlords finally having sold up and got out, the increase in the number of people wanting to rent is significant.

David Brown, commercial director of LSL Property Services, had this to say this week.

“Rents are jumping up as more and more potential home buyers opt to rent. People are wary of a crash in house prices and concerned over the effect of government cuts on their own ability to meet long-term financial commitments. Additionally, many can’t get a mortgage at an affordable rate. Furthermore, the huge number of reluctant landlords we saw renting out property last year have now had the opportunity to bank their gains and sell up. That’s cut into the supply of rental accommodation.”

As usual things are very regional for landlords though. If you are in London or the South you will have seen an average rise of 3%. The other end of the spectrum is nowhere near as rosy with average 1% drops in Wales and The Midlands.

We all know why it happens. There is no getting around the fact that there is a higher percentage of rental arrears in houses rented to LHA tenants. This is particularly true now that the government subsidies are handed to the tenant instead of the landlord. But the truth is landlords are costing themselves money by refusing to rent to LHA tenants.

The fact is that 20% of the market comes from this area. This a large portion to write off as unsuitable for your needs. But how to avoid ending up with a tenant who does a runner owing you money or just becomes a colossal pain to get the rent from?

There are ways. There are precautions you can take that allow you to rent to this large section of the market and reduce your risks of having someone who does not pay.

Firstly, get a guarantor, a homeowner guarantor can really reduce the chances of rental arrears. And in the current climate with so many people being new to renting LHA a lot of people are happy to provide one, especially if you are offering decent accommodation at a decent price.

The other thing you can do is contact an agency that deals in tenant references. This will also reduce your risk.

20% is too large a chunk to ignore so most landlords need to find a way round the problem.

People are still talking about mortgages being hard to get and the bottom line is that they are. But things are improving and at this stage that is the best we can hope for.

According to trustworthy figures that number of approved mortgages and buy to let loans rose from 8.3 billion in April to 9 billion in May. An increase of 4.3%. Which is a fairly significant rise and certainly could be taken as a positive sign.

One thing that is certain though is that only the major high street banks are really in this game at the moment with the overwhelming majority of these loans coming from one of them. That is not a problem as such but we know the industry is full on into recovery when the smaller institutions get in on the act. Plus it is very good for competition and diversity. We don’t wan the big boys having it all their own way.

Luckily many think that the government’s new budget is set to stimulate this loans sector to new growth so with any luck we may start to see the spreading of these loans to other, smaller banks very soon.