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ARLA Research Reveals Britain’s “Reluctant Landlords" April 2009

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ARLA PRESS RELEASE - 15th April 2009:

Frustrated sellers are turning to the lettings market creating a glut of inexperienced landlords, according to the Association of Residential Lettings Agents (ARLA).

94 per cent of lettings agent respondents to the ARLA Members’ Survey of the Private Rented Sector * reported an increase of property coming onto the rental market because it could not be sold. ARLA’s members believe that these figures confirm a trend that has been much discussed but thus far unproven other than through anecdotal evidence.

The trend was reported countrywide with even 92.2 per cent of landlords in “prime” Central London locations reporting an upsurge in rentals coming onto the market for January, February and March.

Ian Potter, Operations Manager of ARLA, said: “Sellers have been left with little option but to resort to renting out their property. These reluctant landlords need to understand the obligations of a landlord to their tenants, and the need to choose a regulated and qualified letting agent.”

Semi-detached houses appear to be the most common type of property succumbing to reluctant letting: UK-wide, 68 per cent of the agents surveyed saw an increase in the supply of these properties onto the rental market. This was followed by detached houses (67 per cent), terraced houses (52 per cent), with flats (29 per cent) and studios (11 per cent).

Ian Potter explained: “These figures confirm the trends we have been hearing from ARLA’s members that sellers looking to downsize are turning to the lettings market after being unable to sell.

“Detached and semi-detached houses are always traditionally harder to rent, but in this market there is now a glut of un-sellable properties coming onto the market. It is another sad indication of the work that the Government must take to free up the sales market and the need to regulate a lettings market that is becoming increasingly competitive.

“For those landlords new to renting, it’s crucial that they look for a local lettings agent who is both regulated and abides by a code of practice. “The agent will also have received the necessary training and qualifications, and consumers can be confident that any funds being held by them on your behalf are protected under client money protection schemes.”

According to ARLA’s members, the increase in new landlords has led to tenants taking extra measures to gain assurances on the security of the property.

According to Lucy Morton, managing partner and head of lettings at W A Ellis (see section below), and president-elect of ARLA, there is a growing trend for tenants to be asking for references on landlords. She explained: "Tenants are increasingly nervous about the security of landlords, we are also seeing tenants asking for assurances that the landlord will be able to cover his mortgage payments throughout their Tenancy."

Source ARLA

Lucy Morton, managing partner of W A Ellis (who becomes President of ARLA in May, sits on the Property Standards Board and is the voice of Lettings in Central London - often quoted in the media) is being called into more and more meetings now with developers and corporate landlords to give valuable advice from her experience of working through previous market downturns.

This month she comments: “Tenants are prepared to move within London, as, in some cases, they can find more space for less money - this was not the case earlier in the year, and we are noticing that a lot of tenants are prepared to make this move. But we are now seeing properties being realistically priced and tenants need to understand this, because it means that landlords are not accepting the huge reductions on quoting prices of previous months. It also means that, in some cases, we have two or three prospective tenants now for a property.

“As a result of properties being put onto the lettings and sales market, a new trend is creeping into the market. We are noticing that people are renting with an option to buy. We have just agreed a one year letting for a substantial house in Knightsbridge and the Tenants have asked for, and been granted, an option to buy the house at an agreed set price for the duration of the Tenancy, ie. for one year they have the right to buy the house. We have also just agreed the letting of another house in Knightsbridge where the tenant has been granted first refusal to buy should the landlord decide to sell during their tenancy. This may happen more and more as people wait to see how the economic climate, and in particular the sales market, pan out.

“Also, due to the serious shortage and increasing demand for sales stock - some un-let properties are now being placed on the sales market which should create more supply on the sales market, and decrease the abundance of stock on the lettings market.

“As President-Elect of ARLA it is interesting to report that the association has delivered a report to Chancellor Alistair Darling asking him to strengthen his proposals to protect tenants from repossession, alongside urging the Treasury to implement measures to increase both supply and quality in the private rented sector. The submission asks for:

Greater protection for private sector tenants during the economic downturn; Incentivisation for private sector landlords to improve the quality of housing stock; Reform to mitigate the adverse impact of Stamp Duty on larger investor landlords.

“Like the sales market, the current downturn is having equally grave consequences on the lettings market.

“ARLA has also called on the Government to ensure lenders give tenants at least two months’ notice of an eviction after a repossession order has been granted. In a case of a mortgage default, the issue of blame would rest with the landlord, not the tenant if the tenant has kept up to date with their rental payments, and it will also allow the tenant more time to find alternative accommodation. The lender may also decide to take rent in receivership in appropriate circumstances. This is obviously more likely, should the tenant be able to prove the rent has been kept up to date.

“25% of the accommodation provided in the private rented sector is in need of improvement and ARLA has urged the Government to incentivise landlords to improve the quality of our housing stock. It is ARLA’s opinion that the Government should implement the following initiatives:

Remove VAT on the purchase of materials and labour for capital expenditure to improve older property brought into the rental market; Introduce capital allowances for landlords improving housing stock over a certain age; Increase the Landlords Energy Saving Allowance (LESA) to include the installation of central heating systems.

“ARLA has also suggested changes to stamp duty as larger investor landlords can be put off buying blocks of property as the Stamp Duty is based on the total value of the transaction, rather than value of individual properties within the block, which is often at the highest rate.”

Source W A Ellis

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See also

The Golden Age for The Landlord? Rental Demand Reaches Record High ‘Generation Rent’ must be given Regulatory Protection - October 2010

Housing Minister Grant Shapps promises 'no more red tape' for private landlords - June 2010

ARLA launches buy-to-let mortgage comparison site - March 2010

Response to FSA Paper on Mortgage Lending - October 2009

Response to statistics from NLA on rental arrear-October 2009

Demand in rental market returns for the first time since recession began - 28 September 2009

Review of ARLA Agreement Magazine on Insurance - August 2009

Property Woman of the Year ARLA sponsors young property woman award at the NLA Property Women Awards 2009 - May 2009

ARLA welcomes the Government’s “historic shift in thinking” on the private rented sector towards improved industry standards - May 2009

ARLA launches new licensing scheme to protect consumer interests - Consumer interests safeguarded by letting agent licensing - May 2009

ARLA - Research Reveals Britain’s Reluctant Landlords - April 2009

ARLA demands an end to unregulated Letting agents - January 2009

ARLA Welcomes Rugg Review on the Private Rented Sector - 24 October 2008

ARLA’s Response to the Law Commission Report - August 2008 and The Law CommissionHousing: Encouraging Responsible Letting

Professional Property Organisations

Tenancy Deposit Scheme (TDS) UK

mydeposits will stick by all letting agentt- January 2009

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