28 April 2015, Everyone involved in the residential lettings industry must be prepared for the one certainty of the General Election just a week away – that no-one can have any idea of the result.
With that in mind, says Lisa Simon, national head of residential lettings for property consultancy Carter Jonas, both landlords and lettings agents should have solutions in mind to cope with rent caps and three year tenancies proposed by Labour as part of its housing policy, together with the end of lettings agents fees.
"The reality is that few tenancies last just the six months that the politicians seem to think the norm and that the lifespan of three years being suggested by Labour, after an initial six month trial period, will often be foreshortened by the tenant’s desire to move rather than the landlord’s desire for possession,” says Mrs Simon.
"There are advantages all round in the certainty of a three year tenancy that are obvious. The tenant has a degree of security while the landlord has a better knowledge of the likely consumer price inflation-linked income and potentially less worry about non-earning voids between tenancies. For Central London landlords the impact would be minimal as the corporate market for years has routinely demanded pre-agreed extension periods and rent negotiated in advance usually in line with RPI that’s currently only 0.9 per cent.
“Some of the more out-dated mortgage lenders will need to amend their offers which currently restrict buy- to-let landlords to providing tenancy agreements for a maximum of 12 months. They should regard this period of certainty as an advantage that allows investors some assurance over their ability to repay the mortgage through the property’s earnings.
"These guaranteed tenancy lengths are fine provided safeguards to remove bad tenants are equally robust. The politicians must ensure that the law doesn’t become a stick with which tenants can beat their landlords. ‘Model’ tenants who turn into the tenant from hell in the seventh month must not have more protection from repossession.
"Equally, lettings agents may have to re balance their budgets to exclude tenant fees. It’s important to prepare, although this may mean raising letting and management fees charged to landlords who will pass them on through higher rents.
"Agents will have a certainty that their fee income will grow in line with consumer price inflation as the rents of which they are a percentage will surely rise because that’s what the law may allow. They will not be reluctant to do so because they know the end-of-tenancy rent may need to be disclosed to the next tenant and the economic model means getting the highest return possible is essential.
"But politicians also have to realise that imposing the duties of Government departments onto landlords and lettings agents, such as immigration checks that have to be applied to every adult over the age of 18 likely to live at the address which is currently being trialled, have to be paid for. If the Government of whatever hue doesn’t want to fund this work, and it probably will not, then it has to accept that a fee is charged to the landlord if the agent does the work and the landlord covers it in the rent.
"In an era where virtually every politician demands that people should earn rather than get benefits, so the politicians must accept that if they want the benefit of private individuals and companies doing their work for them, this benefit has to be funded."