UK Rental Market Update: Insights into the Current Landscape

Welcome to our Property Market blog, where we provide you with comprehensive insights into the current trends shaping the UK housing market. In this edition, we'll dive into key headlines of the current Rental Market - including supply and demand dynamics, challenges faced by investors, rental growth versus earnings, and regional snapshots. Let's explore the latest findings!

 

- Annual rental inflation for new lets in the UK remains high at an average of 11%, slightly down from 12.3% in mid-2022.

- Rental growth continues to outpace earnings growth, raising concerns about affordability for renters.

- The demand for rental properties remains significantly higher than the five-year average, while the supply of privately rented homes in Great Britain has seen a minimal 1% increase over five years.

 

Supply and Demand Imbalance:

- The stock of homes available for rent is 33% below the five-year average, highlighting the significant supply and demand imbalance.

- According to the recent ARLA Propertymark Report, the demand for rental properties recorded by member agents in April 2023 was 24% higher than the previous year, further exacerbating the supply shortage.

- Factors such as rapid growth in overseas students and high net immigration contribute to sustained demand for rental properties. This follows the Government shake-up of Visa rules in 2021 to help attract more skilled workers to the UK.

 

Challenges for Investors:

- The number of privately rented homes has only increased by 1% since 2016, as new investment is offset by properties leaving the rental sector.

- Tax changes, growing regulations, higher borrowing costs, and tighter lending criteria have prompted landlords to reassess their portfolios and investment strategies.

- Mortgage rates have increased, impacting the equity or deposit levels required for new buy-to-let purchases, along with stricter lending criteria and stress tests.

 

Rental Growth and Existing Tenancies:

- Existing tenancies have seen rental increases at an average of 4.4%, significantly lower than the market average for new tenancies.

- Landlords are encouraged to review their rents periodically, especially considering challenges such as tax changes and higher mortgage rates, as rent increases can positively impact investments.

 

Breakdown of the Private Rental Market:

- The core private rented sector, comprising long-term lets, accounts for 66% of the market, offering lower hassle and workload.

- Sub-sectors such as holiday and short lets or HMOs may provide higher yields but come with additional costs, workload, and regulations.

 

Regional Snapshot:

- In the West Midlands region, average rents have seen a year-on-year increase of just under 10%, with Birmingham ranking among the top five cities for rental growth.

- Manchester, Edinburgh, Glasgow, and Nottingham also demonstrate strong growth in rental prices.

 

Conclusion:

The UK rental market continues to experience robust demand, outpacing earnings growth and raising concerns about affordability. The supply shortage persists, presenting challenges for both tenants and landlords. Investors face changing dynamics, including higher mortgage rates and stricter lending criteria. Regular rent reviews are encouraged to ensure investments remain financially viable.

Thank you for reading our Rental Market Update blog. If you are a landlord or property investor and would like some advice or to share your views, please contact me anytime...

 

Ali Durrant MARLA

Director of Concentric Sales & Lettings 

ali@concentricproperty.co.uk

The Must-Known Legislation To Let A Property Compliantly

Landlords, are you aware of the two main pieces of legislation that you need to comply with to remain safe and compliant? 

In the ever-changing private rented sector, it can be difficult to keep up with the latest laws and regulations that govern this space. However, failing to meet the government’s requirements can result in serious consequences in the form of; notices, fines and prosecution.

That’s why we at Concentric Sales and Lettings are focused on helping you get the compliance information you need on all aspects of Landlord law. In this blog, we’re going to dive deeper into the two pieces of landlord legislation designed to ensure the safety of your tenants within your private rented properties. These two laws are The Landlord and Tenant Act 1985 and the more recent Homes for Fitness & Habitation Act 2020.

 

The Landlord and Tenant Act 1985

Section 11 of the Landlord and Tenant Act 1985 details a landlord’s obligation for repairs. Simply put, as a Landlord, you must ensure the safety of your rented properties.

Specifically, you must ensure that the air, space, water, and heating of the property are properly maintained and kept safe. The law also clearly states that you must carry out repairs on your properties as and when they are due. 

This brings up the question – when are repairs due? 

The legislation states that repairs should be carried out on a “reasonable timescale” based on when you are first notified of the repair requirement. “Reasonable” is somewhat subjective and difficult to define but generally depends on factors such as (a) whether or not the tenant is living in the property and (b) whether or not the severity of the repair warrants an urgent response.

Major repairs (as in water gushing through a ceiling) are required to be acted upon immediately. You, as a Landlord, should take all reasonable steps to carry out any maintenance work or repairs to the best of your ability. Some repairs may take time to be rectified, but as long as you have taken the steps that you can take, the law will consider it reasonable. 

 

Protect Yourself Against Claims

We recommend that you always act as quickly as possible when carrying out repairs for your tenants. This is not just for the comfort of your tenants within your rented property. It is also one of the best ways to protect yourself from potential claims that the tenant may choose to pursue against you. 

Under the law, tenants have the right to report any outstanding maintenance issues to the local authority. The council may then decide to carry out a full inspection which can often lead to a much longer list of repairs. 

It’s important to remember that you are not the only person given responsibilities under Section 11. Tenants are also obligated to “behave in a tenant-like manner”, meaning that they are required to take care of the normal maintenance activities that keep the property clean and functional. This includes things like changing lightbulbs, keeping the drains clear, cleaning the gutters, and other similar activities. Now that we’ve covered the first piece of legislation for landlords let’s cover the second, more recent law. 

 

Homes for Fitness & Habitation Act 2020

This law does not replace the one we’ve discussed but creates additional rights and responsibilities. Generally, it focuses on areas that are not necessarily covered under the Landlord and Tenant Act 1985. There are two key factors you should be aware of when it comes to this law. 

First, this act gives tenants the right, for the first time, to take a Landlord to court for not maintaining their repairing obligations. The government has removed the requirement to first go to the local authorities and has enabled the tenant to go directly to the courts. Landlords must be aware of this change.

Secondly, Landlords are now responsible for hazards and repairs within communal areas throughout the tenancy. You are obligated from the moment the tenancy begins through to the conclusion of the tenancy to ensure that the property is fit for human habitation at all times. The only way to achieve this is through regularly inspecting the property. You must not rely on tenants to report repairs because they do not always do so. 

 

Final Thoughts

Your main focus as a Landlord should be to ensure that your tenants are safe at all times. Failure to comply with these laws can result in; prosecution by the tenant in court, penalties issued by the local authority, fines, and improvement notices that can restrict your right to gain possession of your property. 

With over 170 different pieces of legislation regulating the private rented sector, you may be wondering how to be compliant as a Landlord. 

Fortunately, we have created several resources to help you stay safe, compliant, and up-to-date. That’s why we run a quarterly webinar hosted by Dawn Benett, where we spend 2 hours diving deep into various pieces of legislation that you need to know about. Click here to register for FREE today!

Should Your Address Be On A Tenancy Agreement?

Landlords, did you know that there are over 170 separate pieces of legislation that directly impact the private rented sector? Here at Concentric, one of our big goals is to help educate you to be able to navigate this maze of rules and regulations so that you can stay safe and compliant. 

While you may prefer not to share your residential address with your tenants, did you know that there are laws that govern whether or not you are permitted to withhold your address? The two main rules that apply to your address are Section 47 and Section 48 of the Landlord and Tenant Act (1985). Let’s get into them. 

 

What Section 47 Means To Your Tenancy Agreements

Let’s start with Section 47. Section 47 of the Landlord and Tenant Act of 1985 states that a landlord’s address must be present on all documents that are, in fact, a demand for payment. The document that most commonly falls within the purview of this legislation is your tenancy agreement. This means that you, as a landlord, have a legal obligation to include your residential address on your tenancy agreement. Is your address present on your agreement currently? If not, you could be falling foul of this regulation. What does this mean? 

Your tenants are not legally liable or responsible to pay any rent they may owe you until you have shared your residential address. The law is clear. If you’re using an agent, you are not permitted to use your agent’s address. Rather, the address on the agreement must be the landlord’s residential address, wherever that is in the world. The reason this legislation applies to the tenancy agreement is that it is, in the eyes of the law, a demand for payment. Until and when you have provided your residential address, the tenant does not legally have to pay. It makes sense that you, as a landlord, may feel some reservations about having to share your home address with your tenants. However, in the private rented sector, this is a given right that the tenants have been legally granted. Section 47 grants tenants the right to identify the person from whom they are renting. 

Moreover, if the tenant makes a formal demand, in writing, to you as the landlord or your agent, each party is obligated to respond to that request within 21 days. As we have already mentioned, failure to supply the information within that timeframe could result in the tenant refusing to pay rent until the information requested has been provided. In that situation, the tenant would be in their full legal rights to withhold payment from you, the landlord. 

 

Why You Need To Know About Section 48

The other significant rule that impacts whether or not a landlord must share their address is Section 48 of the same law. Again, this section focuses entirely on the landlord’s address. However, in this case, the legislation refers to an address being given to a tenant in England or Wales for the sole purpose of serving notice to that tenant. In this case, landlords have more flexibility, as the address can be that of your agent or your place of business, depending only on your preference. If you are a company landlord, then the address to provide tenants, under this section, would be the registered address of the business.

Ultimately, these sections of the Landlord and Tenant Act of 1985 do not carry penalties or fines if you are in violation. However, that does not mean that they are inconsequential. The ultimate penalty could be that your tenant simply chooses not to pay the rent. In that event, the law would not require the tenant to pay until the residential address of the landlord was provided. 

 

Conclusion

To recap, Section 47 places a clear obligation on landlords to provide their residential address to their tenants on their tenancy agreement and on any other documents that are payment requests. Section 48 requires that landlords share their business address (or the address of their agent) when serving notice to tenants, only when the tenants reside within England or Wales. 

We hope that you’ve found this information useful. It’s important to always stay informed about legislation so that you can remain in compliance and continue to serve your tenants. If you’re curious about where you can get more information on the latest and most important legislative updates, our very own Dawn Bennett hosts a quarterly webinar where she drills down into a variety of the many pieces of legislation that apply to our industry. 

Landlords Heading To Liverpool As The City Property Market Booms

new report has revealed Liverpool is the place to buy for landlords – but anyone looking to add to their portfolio should act quickly, as property prices are on the up faster there than in other locations.

The report (commissioned by London’s Beauchamp Estates and Liverpool’s Logic Estates, with analysis by Dataloft) describes the city as a ‘regional powerhouse’, stating residential property prices have risen more quickly than anywhere else in the last five years – including the capital.

But this surge shouldn’t deter potential investors, because prices there are still affordable compared to other key locations. The report looks at the Liverpool Waterfront, where an average-priced apartment would cost just under £240 per square foot. This compares to around £353 (per square foot) for a similarly well-positioned property down the road in Manchester and £678 (per square foot) in London.

Buy-to-let landlords are also collecting higher rental yields – with an average of 6.4% across all apartments in Liverpool, compared to 5.5% in Manchester and 4.5% in London (of the cities included in the survey, only Leeds saw a higher rental yield for all apartments, sitting at 6.7%).

And there are also seemingly more renters to attract – 55% of the city’s population live in private rented accommodation, compared to 27% in the capital and 17% across England as a whole.

However, while this report extols the virtues of buying in Liverpool, it’s worth noting that there are multiple favourable locations which have emerged as key investment hotspots in recent reports.

The Buy To Let City Tracker research undertaken by Aldermore Bank saw Bristol top the list of best places to purchase an investment property, based on indicators including average total rent, short and long-term returns, percentage of vacant housing stock, and number of renters.

Second place was Oxford, with Cambridge coming third, followed by Manchester and Luton to complete the top five.

And in a third piece of research – this time conducted by Compare the Market – Birmingham topped a list of the 20 best places to be a landlord in the UK, with Bradford, Coventry, Bolton and Burnley also making it into the top five.

Electrical Certificates – why every landlord should have them

The risks

Imagine if you picked up the phone in the middle of the night to be told that there was a fire at your rented property. As horrific as that news would be, one of the first things that the fire department, the police, and the insurance company would check is whether or not the electrics and electrical appliances within the premises were safe, or whether they could have been the cause of the fire.

And if that were the case, who do you think liability would automatically be with?

If you fail to produce a valid electrical certificate, it could very well be you, the landlord. That would mean that not only do you risk prosecution, but it’s highly unlikely that your insurance would payout.

But, if you have a valid, up to date certificate from a qualified electrician, then you have proof that you have done everything you can to ensure that the electrics in that property are safe. In that case, liability would no longer lie with you as the landlord, but with the electrician, as the question would be whether he had completed the work properly, or with the tenant, who has a responsibility to take care of the property while he or she lives there.

Is it law to have an electrical certificate for my property?

It will be, as right now Government are in processing a law which will mean that all rented properties will have to have electrical checks every 5 years. However, until that time, most agencies are recommending that their landlords get ahead of the game and make sure that all new tenancies start with a valid and up to date electrical certificate, before the tenant moves in.

That’s because, under the Consumer Protection Act Section 37 and Section 19, you have a responsibility to guarantee that your property is safe and fit for tenants to live in. And having an electrical certificate is part of that responsibility.

What will the new law mean for landlords?

Landlords will be required to have electrics checked in their properties every 5 years. This is mandatory, and must be carried out by a qualified electrician. This will be phased in over 24 months; in the first year, all new private tenancies will be affected, and in the second year, all existing private tenancies will also have to adhere.

If a property has recently had an electrical installation condition report (EICR) and has a valid certificate, then the property will not be required to have an inspection until 5 years has lapsed since the date of issue.

What will the required checks include?

The new legislation will require 5 mandatory recommended electrical safety features, which are:

What’s the difference between an EICR and a PAT test?

When we talk about getting an electrical certificate for your property, we’re really talking about the EICR – this is a test carried out by a qualified electrician, and tests the infrastructure of the properties electrics. As detailed above, this includes the wiring, units, plug sockets and switches etc.

A PAT test is really there for the appliances within that property. That would be anything that you include as portable appliances in the property, which might be things like a fridge or freezer, electric oven, dishwasher etc. It’s not mandatory for you to have a PAT test, but some landlords like to get one if they do include these appliances, as again, it provides an extra layer of cover if anything should happen.

In conclusion

While it’s not law to provide an electrical certificate at the time of writing, it’s highly recommended that you obtain one. It’s a small price to pay for peace of mind that your property is safe, and that you won’t be held accountable if something should go wrong.

The Government will be changing the law on this soon, so get ahead and make sure that you’re properties are protected, if not on existing properties, but on all of your new tenancies going forward.

If you are looking to keep all your properties safe by staying compliant with current legislation, click HERE to download our FREE compliance checklist.

Things you should consider before you rent out your property (Part. 2)

Mortgage Consent

If you are renting out a property that you have previously lived in yourself, you will be required to apply for a buy-to-let mortgage. A property cannot legally be leased on an ordinary residential mortgage.

If you have lived in the property prior to wanting to let it out, first check with your lender, as there are some rules which may differ from lender to lender – for example, some lenders specify that you are required to have lived in the property for a minimum of 6 months, to ensure that you have not, in fact, bought the property with the intention of renting it out in order to cheat the system and avoid the fees and deposit required. So it’s a good idea to check this before you do anything else.

Check your lease

Something else that is easy to overlook is the lease. This applies if you are letting a leasehold property, usually a flat or apartment, but bear in mind that you will need to make sure that your lease allows you to rent out the property in the first place.

In addition to this, check that there are no other restrictions, such as allowing pets etc. If there are, these will need to be made clear to the prospective tenants when they view the property.

Insurance

Make sure that you have the right kind and level of insurance, one which covers you for tenant related issues. Your ordinary home insurance will likely not do what you need it to do, so if you have a buy-to-let on the property, it’s essential that you have the right insurance product to match your needs.

If you don’t live in the property, the kinds of risks are very different, and you will need to cover yourself as a landlord for things such as loss of rent, malicious damage, and legal expenses. A more specialised insurance will take that into account.

Tenancy Agreement

When did you last review your Tenancy Agreement Documents? It’s so easy to keep regurgitating the same cut-and-paste document you’ve always used – but in reality, things change. If your current document is more than 6 months old, it’s worth going through it, as there have been updates in terms and regulations which you might need to revise in the text.

Remember; the Tenancy Agreement is there to protect you and the tenant, and so anything that’s missed off or out of date can and will land you in hot water if something goes wrong. Do not put yourself in this situation – get it checked, and get it updated.

Inventory

An Inventory is not, as some landlords believe, just for furnished properties. It’s important that you list everything within the property to make sure that you are covered for any damages during the lifetime of the tenancy. This includes every aspect, from the condition of the walls, flooring, lighting and electrical furniture, doors and handles, windows, fitted appliances….

Your Inventory is the only evidence you are going to have if, at the end of a tenancy, you find that there is more than just wear and tear to the carpets, that kids have embellished their walls with crayon, or the kitchen units are damaged.

If you can, as well as a comprehensive list, take photos of everything within the property, so that you can prove the original condition of the property before the tenants move in.

Deposit Registration

You should sort out Deposit Registration BEFORE you rent out your property. Make sure that you have done your research, and looked for a suitable scheme in time for the start of the tenancy.

We’re often asked about the standard of free schemes vs paid ones; this really comes down to personal preference, there are some very good free schemes out there – just do your homework, ask for recommendations, and don’t rush in if you’re not sure.

Deposits must be lodged within 30 days of payment – in other words, you have 30 days from the payment date to lodge the deposit, and then you must issue the tenant with a certificate which lets them know the details of the company with which you have lodged their deposit. This should happen at the start of tenancy, and at the stage of renewal.

You as a landlord

How various landlords operate differs widely – from the types of properties they rent to how involved they are with management and upkeep. There is no one size fits all, but the one thing that all landlords should agree on is to make every effort to keep up to date with the lettings industry, with legislation, changes in the law, and current trends.

The more knowledgeable you are, the better prepared you are to deal with tenancy problems and queries down the line. Knowing current legislation can be the difference between a contented tenant and a spell in prison.

There are plenty of online communities and groups where you can go for help and advice, and if you personally know other landlords, it can be a great bonus to you. Seek them out, ask for their help and advice if you need it.

We run FREE monthly webinars that are purely for the benefit of landlords, all on specific legal advice and the latest updates in legislation. These are delivered by our compliance expert Dawn.

Click the link here to register for our next one, but be quick, as they are extremely popular and there are only a limited amount of spaces available!

Section 11 Repairing Obligations – what you need to know

Statutory Implied Terms

Firstly, what are the obligations of the landlord under the Landlord and Tenant Act? The official line states that:

“The landlord [is] to maintain the structure and exterior of the property, including installations for the supply of water, gas and, electricity, heating systems, drainage, and sanitary appliances.”

In simple terms, this means that if anything you as the landlord have provided as part of the tenancy, it is your obligation to keep it in good working order throughout the duration of the tenancy.

If we look a little deeper, the statement implies that the installations are ‘maintained’, which tells us that they must indeed be in proper working order before the start of the tenancy. It’s important that anything that isn’t in good repair is dealt with before the tenant moves in, otherwise, the landlord can be deemed in breach of Section 11, and therefore can be prosecuted.

So, what is included, and what do we mean by installations?

Maintenance of the structure and exterior is quite self-explanatory; by this, we would include the brickwork and external structure, roof, drains and gutters, and windows and doors, etc. It is expected that the property is structurally sound, will not be subject to leaks or damp caused by damage to brickwork or roof damage, and is secure, with adequately fitted doors and windows etc.

With regards to installations, you should include in this anything that is included in the property as part of the agreement. That includes any appliances which are already in the property when the tenant moves in. It also includes all and any water or gas pipes, electrical wiring, water tanks, boilers, radiators, and other space heating installations such as vents for under-floor heating, baths and sinks, and sanitary ware.

 

Supplied appliances

If you have provided appliances to the tenant as part of the tenancy, i.e. they are not gifted or provided as a goodwill gesture, then these must also be kept in good repair as part of the agreement. These might include:

As a landlord, it is not under your responsibility to repair items that belong to and were brought into the property by the tenant. Make sure that any items you have provided are included in your tenancy agreement, and are listed on your inventory. It is also important that you can prove the condition of provided appliances in your inventory, so that your tenants cannot claim for damages for which they are responsible.

 

Advertising the property and the Consumer Protection Act

Something you’ll want to consider when you’re advertising the property is what you’re including in the tenancy. If, in your photographs, you have shown the property with white good, and you are not intending to include them, you must state that in your advert, and make it clear whether you are willing to gift those items, or whether they will be removed before the tenant moves in.

 

Tenancy Issues

Something we’ve seen come up and have frequently been asked about is whether the landlord’s responsibility under Section 11 changes if the tenant is behind on their rent, or is under dispute for some other reason.

The answer is absolutely not. Regardless of any issues with the tenant, you as the landlord are still under obligation to make good any repairs to the structure and installations included within your property.

You must also get the permission of the tenant to gain entry to the property to make any necessary repairs. While we know that when a tenancy is under dispute, this can sometimes be difficult, but remember that if you don’t have permission to enter from the tenant, then you can be liable for trespass.

In all circumstances, the tenants right to privacy in their home should be respected.

If the health of your property is a concern, you can download our FREE compliance check download here.