January 2008

Estate agents are hoisting For Sale signs above their own businesses – a sign of the difficulties facing the housing market.

But experts say many have left it too late, and that the chances of achieving successful sales look bleak, as they lack the transaction levels and instructions to tempt a buyer and face the possibility of running out of cash before any sale could complete.

Howard Weston, managing director of business broking firm Lucas & Weston in Bath, said he had been approached by 18 estate agency proprietors within the last three weeks.

He said: “They are evenly spread across the country, in both cities and rural locations. They range in size from seven-branch businesses to one-man bands. They mostly appear to be newish agents – people who came into the business three or four years ago, and who made money in a rising market but who find that they do not now have a financial cushion.

“If agents haven’t husbanded their resources to prepare for this market, they will be in difficulty. Everyone knows there is a problem with property, but few accept there is a crisis: too many people are in denial.

“At least four or five of those agents who have approached us for advice are being squeezed hard. They don’t have sufficient properties on their books and they will find it difficult to sell, largely because they will have run out of money in the time it takes to complete a sale.

“We will probably not be able to do anything to help most of those agents who have asked our advice.”

One big agent, Humberts, lost its chairman and chief executive after issuing a profits warning. It had been snapping up estate agency businesses, buying largely on deferred payments, which it could struggle to meet if it does not get extra funding.

The Royal Institution of Chartered Surveyors reported that the balance of members reporting house price falls reached levels in December not seen since November 1992.

Landlords in England and Wales need to be aware that the Government appears to be on track to introduce Energy Performance Certificates on residential letting properties on October 1 this year.

Despite previous suggestions that a new EPC would be needed in between tenancies, Communities and Local Government has clarified that an EPC will only be needed on residential properties every ten years.

This timescale is in keeping with the EU agreement but is out of step with the current requirement for a new EPC to be supplied every time a home is sold. In theory, this could mean that new EPCs might have to be supplied on residential properties either far more often than every ten years or very rarely.

From October 1, it looks as though the first time that a landlord will have to commission an EPC is when a new tenancy agreement is due to begin on a rental property.

An EPC can only be issued by a Domestic Energy Assessor who will rate the property between A (excellent) and G (terrible) for both energy efficiency and energy emissions, and will make recommendations for improvements.

Even if the landlord makes the recommended improvements, there is no need to commission a new EPC, unless the landlord wishes.

A copy of the EPC will have to be made available to each prospective tenant and given to the tenant when the contract is signed.

A major review of the residential letting sector has now been formally announced by former housing minister Yvette Cooper.

Among those welcoming the news was the British Property Federation which said it hoped the review will pave the way for greater investment from institutions, which could fund large scale, professional 'build-to-let' developments and put an end to the housing crisis.

The BPF said: “While the Government's housing targets have focused solely around building three million new homes for ownership, these promises have consistently ignored the basic fact that people just cannot afford to buy homes.”

The review is being led by two eminent academics, Julie Rugg and David Rhodes at York University.

http://www.communities.gov.uk/documents/housing/doc/672051

Amidst the doom and gloom about both the commercial and residential property markets, one niche area is bucking the trend – hotels.

Research from Deloitte shows that the hotel sector has maintained strong growth. Hotel occupancy rates have continued to climb to 83.6% and revenue from London hotels grew by more than 10% in 2007.

Property investors can, of course, be part of the action by buying hotel bedrooms which they can occupy themselves for 52 nights of the year while also taking 50% of the room’s rental income.

GuestInvest, which pioneered the trend, is now expanding thanks to a £200 million injection from the Bank of Scotland.

GuestInvest, which recently acquired the celebrity hotel Blakes, has now bought two other hotels in London which will add 433 more bedrooms to its portfolio.

One of the hotels will be converted from a row of houses in Notting Hill. The other is to be called The Jones. Situated near Hyde Park, it will be open for business in mid-2008 following a multi-million pound redevelopment programme.

Rooms will be on sale from February with prices starting from £317,000. GuestInvest says it plans to expand worldwide in at least ten major cities.

Guesthouse West, which was GuestInvest’s debut hotel, launched in April 2004, has earned investors returns in excess of 8% in the last year, with those who have since sold their rooms netting an average capital growth of 15%.

All available Guestinvest hotel rooms are currently sold, and the firm’s founder, Johnny Sandelson, said: “We’ve made our latest acquisitions in response to the growing appetite among investors for a property investment that will continue to provide strong returns.

“The Jones and our other acquisition in Notting Hill will bring our hotel group to six boutique hotels and strengthen our position as market leaders of the hotel investment revolution.”

GuestInvest rooms qualify for SIPPs, classed as commercial property

The University of Warwick Students’ Union is to pursue an HMO landlord who they allege has not paid student lodgers rent during the period that the properties concerned were not licensed.

The students successfully claimed back 50% of their rent under the Housing Act, which penalises landlords of properties of three storeys and more and inhabited by five or more tenants who form more than one household.

The landlord, a Mr Bahi of Leamington Spa, Warwickshire, was given the opportunity to settle the award made by the Residential Property Tribunal in the form of two payments, one in December last year and the second instalment in the following months.

The Students’ Union claims the landlord did not make the first payment, and that it will now be taking steps to recover the total amount in full, along with any costs incurred.

Ed Callow, welfare and equal opportunities sabbatical officer at the Union, said: “We are at something of a loss to understand why Mr Bahi has experienced difficulties in finding the £18,500 he has been fined when it emerged during the tribunal that his property portfolio was estimated at £2.5 million, and his income from property rentals was estimated (by Mr Bahi himself) to be in the region of £10,000 per month.”

Although the properties were unlicensed while apparently falling into the mandatory regime, it was also noted that they were in good order.

The maximum fine for failing to obtain a mandatory HMO licence is £20,000.

Landlords are warned to check up on properties where older hot water systems are installed.

The alert follows an inquest into the death of a baby in rental accommodation. She died after receiving burns when boiling water overflowed from a cistern in the floor above. The thermostat had failed and the cistern melted down.

Landlords of older properties are urgently warned to make checks in situations where similar events might occur, and in particular, to ask their tenants to notify them immediately if water appears to be scalding.

A new energy provider, Spark, has come into the market, supplying gas and electricity to the residential lettings market.

It has so far secured deals worth nearly £2 million, signing up a number of landlords and more than 40 property agencies managing over 8,000 properties between them.

Commission is earned when tenants are introduced to Spark, who in return get guaranteed lower energy bills when they switch.

Located on the Scottish borders, Spark has won recent £500,000 backing from a London investment house and is looking to expand.

Following deregulation, Spark Energy is one of the only companies to have broken through the significant barriers to entry, securing a position as the UK’s eighth largest utility – or, as chief executive PJ Darling put it, the UK’s smallest utility, as there are only eight.

Darling said: “As an independent energy company, we have complete control over pricing, partner support and customer service delivery. Our competitors are not interested in the residential lettings market. We spotted this opportunity and are here to provide the support this sector needs.

“The administration of utilities is a painful process for letting agents, from billing during void periods, to tracking down existing suppliers and managing tenants moving in and out.

“We take all the hassle away by looking after the administration surrounding the change of supply and change of tenant process, and covering the cost of energy during void periods between tenancies.”

Commission is paid for every property switched to Spark Energy and the tenant benefits from a price guarantee, renewable energy targets and commitment to excellent customer service. Spark says that 100% of its energy will come from renewable energy sources by next year.

Spark also offers what it calls convenient solutions to old problems including smart meters that mean an end to estimated bills and SMS customer alerts whenever an online energy bill is ready.

www.sparkenergy.co.uk

The Tenancy Deposit Scheme, one of three schemes authorised by the Government, is now protecting £400 million worth of tenants’ deposits, compared with £300 million three months ago.

In the same period, the number of tenants and tenancies covered both rose by 39%, to encompass 596,343 tenants in 391,790 tenancies. The number of landlords in the scheme rose by more than a third, from 217,134 to 293,487.

Chief executive Lawrence Greenberg said: “This is a huge growth and reflects a much greater understanding of the legal obligations on landlords.”

Compulsory tenancy deposit protection was introduced last April. The RLA’s comprehensive, plain English guide to the schemes, and alternatives to taking deposits, can be found at http://www.rla.org.uk/landlord/tenancy_deposits/. Additionally, for those landlords wishing to join the insurance-based TDSL scheme, the RLA offers a members’ subsidy that provides a lower price on registration. For further information, please visit www.rla.org.uk

Since mid-2007, and in conjunction with Leeds City Council, the RLA has been running courses on HMO licensing and landlords' required responsibilities. A series of dates are available on the RLA website and more will be added soon.

Presented by Neil Marsden, environmental health specialist and ex-Services Development Manager for Leeds City Council, the course covers a wide variety of subjects including health and safety hazard management, HMOs, tenancy deposit schemes, possession proceedings and much more.

RLA members receive preferential discounts on all RLA training courses and further information can be found at http://www.rla.org.uk/landlord/courses/courses.shtml