Buy to let unethical ?

[superlightr]

skwdenyer said:

superlightr said:

so say you go and live and work in Germany (cos its so good!) you don't want to sell your house in the UK just yet as thats a bit permanent and heck even you have to admit you may not actually like it in the Fatherland so you decide you want to rent your house out. All good so far.

At present you could let it for say 1 year and then come back if you don't like their taste of their sausages. All good so far.


If tho you have protected tenants in the new Skwdenyer government of the UK with say 5 years min terms for tenants? 10 Years min terms - would you rent your home out? What if you want to come back after 1 year? Still good for you?

So with that option you decide to still go to Germany to savour their pickles but you leave your home empty. no income, no tax paid no other person housed. how is that better?

Edited by superlightr on Wednesday 27th September 14:12

Edited by superlightr on Wednesday 27th September 14:13

Edited by superlightr on Wednesday 27th September 14:13

With respect, the situation you describe was dealt with long ago. The Increase of Rent and Mortgage Interest (War Restrictions) Act 1915 provided that a landlord could end a tenancy if the property was reasonably required by the landlord for his own occupation - which covers your case. Subsequent legislation maintained that exception.

Even today, that is a ground for possession in some circumstances - 1 BTL landlord I know (who owns >1000 individual flats in his own name) makes every tenant sign a paper acknowleding that the property was once the principal residence of the landlord and, therefore, might be subject to such a claim...

So, no, nothing I'm proposing would catch the expat worker looking to preserve a foothold in the UK property market - provided that they made the tenant aware of that possibility at the outset of course.

so they have no real security then do they even under your new utopia?

[drainbrain]

skwdenyer said:

chow pan toon said:

The default position round here seems to be to sign tenants up with successive 6 month ASTs rather than considering longer-term arrangements. It surely isn't great for anyone apart from the letting agencies creaming off £100 or so for "preparing new contracts" each time.

There is a world of difference between a landlord allowing a good tenant to stay, and a tenant having that right.

Not just a functional distinction; an emotional distinction. It - consciously or otherwise - makes an enormous difference to the way people think and act - about themselves, their families, their communites, etc.

In any case, those "building a long-term portfolio" are not going to care either way, are they?

Council Tenants have had tenancies like that remain (and let's not forget that such security of tenure was the norm up until 20 or so years ago - and some tenants still have those sort of tenancies), and there is no sign of that changing (there are signs of an income cap applying however, but that's a different thing).

In my view, society is built upon a bedrock of rights and responsibilities; not on largesse, grace and favour. Tenants should not have to trust to luck that their landlord is one of the good ones. And, in any case, why should they join that lottery?

The *only* way to get security is to buy. By definition, that will tend to leave leaner pickings of tenants in the rental market.

Germany has 50% private rented accommodation. Germany has security of tenure. Germany has markedly greater social cohesion and scores well on a bunch of other metrics. Germany has a far bigger - and still profitable - BTL market.

I would tend to argue that, witht proper reform, the UK private rental sector could provide security as well as social benefits, and lead to a larger business for the landlords.

Of course Chow Pan Toon doesn't really understand how ASTs operate in practice or he'd realise they aren't successively rewritten. They roll.

Anyway, the rest of the above, apart from the opinions, isn't really in line with reality.

Homing in on a couple of points, whilst the legal format of leasing may have changed, in operational terms - in The Real World, if you like - NOTHING has changed. Good tenants are more than welcome and often even incentivised to encourage them to retain their tenancies for AS LONG AS POSSIBLE. Forever would be ideal. And conversely, bad tenants who do not conduct their tenancies acceptably are ejected. Same as it ever was and (hopefully) will be.

It isn't about "good" or "bad" landlords, it's about ALL landlords being happy that anyone conducting their tenancies in a normal or even acceptable manner stays for as long as possible. In fact any tenant of even below average intelligence understands this, and well knows that the landlord wants them to stay for as long as possible and that the ball is largely in the tenant's court as to how long they remain.

This ejection of tenants and ending of tenancies also exists for council/social housing tenants y'know. Even if the level of tenant misconduct which requires the ejection is higher (to the chagrin of neighbours/local cops/ the taxpayers' purse etc etc). And there wasn't some kind of Golden Era in some Old Days fantasy where tenants had better/stronger/more secure tenure either. Otherwise the abuses of Nick 'Highstreet' Hoogstraaten and Funboy Rachmann and their many clones and copyists would never have occurred.

The other point is about Germany. I can only speak about Berlin and have no doubt different parts to some extent operate differently, but please be assured that whilst there ARE differences between our system and theirs there are just as many positives and pitfalls for both tenants and landlords albeit different ones. Here's a snippet which is illustrative of what I mean from a tenant's perspective:

https://www.toytowngermany.com/forum/topic/93207-w...

From an owner's perspective the affordability issue in Berlin makes London's "astronomical" price rises seem modest. The commonplace slightly dilapidated and old-fashioned longterm occupied residential btl which cost €12k a decade ago is now €100k. And it's a huge disincentivisaiton to investors to discover the level of CGT applicable to flippers and speculators, and, more importantly, improvers. Which makes the activities of the likes of Dolphin Trust more understandable along with the understanding of why Berlin and surrounds has just so much rundown dilapidated property.

Edited by drainbrain on Wednesday 27th September 15:01

[skwdenyer]

superlightr said:

so they have no real security then do they even under your new utopia?

As ever, enforcement has to be enforcement. There's a world of difference between the general case and the edge case you've proposed, as you know. How that detail was worked out would be one of many important considerations.

In extremis, if abuse was likely (or impossible to control), then I'd advocate closing the loophole - if you want income from your property, it must attract security of tenure. Yes, some people would suffer. In life, some people always suffer.

As we are, there are signs that up to 25% of households could be private rented property within a few years. None of whom will have security of tenure. All of whom will be just months away from having to move.

Imagine living your life under a ticking clock, waiting for if/when notice is served through no fault of your own. It is hard to believe that many would really and honestly think that that is conducive to a good and stable society.

Of course, what such instability does do is to encourage people to fight tooth and nail to buy, which in turn increases competition, which in turn pushes property prices up. That may be coincidental of course.

[superlightr]

skwdenyer said:

superlightr said:

so they have no real security then do they even under your new utopia?

As ever, enforcement has to be enforcement. Imagine living your life under a ticking clock, waiting for if/when notice is served through no fault of your own. .

Tenants can have a fixed term of tenure ie 1 year, 2 years, 4 years just that its uncommon for 4 years at present.

You mention the owner can come back to live there giving notice. I think you are incorrect with the ground of owner returning (ground 1 I recall) under s21 - yes there is that ground but it does not apply during a fixed term tenancy.

I cant recall reading or hearing about any court cases where this has been granted during a fixed term tenancy. It would also go against basic contract of a fixed period.

Edited by superlightr on Wednesday 27th September 15:21

Edited by superlightr on Wednesday 27th September 15:22

[drainbrain]

superlightr said:

At present you could let it for say 1 year and then come back if you don't like their taste of their sausages.

I have to say that we took on very few of those properties to let, mostly because of the unrealistic expectations of owners. But if you take them on, do you explain the circumstances (including the potential short term nature of the tenancy) to any tenants thinking of renting them?

Obviously with the extraordinary increase in modern workforce mobility there's plenty of demand for short term lets. But do you encertain the prospective tenant knows the score?

[superlightr]

drainbrain said:

superlightr said:

At present you could let it for say 1 year and then come back if you don't like their taste of their sausages.

I have to say that we took on very few of those properties to let, mostly because of the unrealistic expectations of owners. But if you take them on, do you explain the circumstances (including the potential short term nature of the tenancy) to any tenants thinking of renting them?

Obviously with the extraordinary increase in modern workforce mobility there's plenty of demand for short term lets. But do you encertain the prospective tenant knows the score?

there are few actual landlords that we deal with like this but of the ones that do there is a high % of those owners who have said this to us, then change their mind and decide to extend. One has been extending a 6mth let (cos of work) for over 18 years now - many different tenants of-course all on 6mth TA.

tenants - we confirm before we let to them that we will prepare a 12 mth tenancy and at the 9mth stage write to both parties to ask if they wish to extend. if the LL do and they do then we prepare another 12/6 or roll on etc.

We are here to let the property not to put people off.
We can only guarantee the tenure of the fixed term and confirm the process of asking for renewal.

I would echo an earlier post of yours - that many of our tenants are relatively short term and it them that want to move
out ie 1 or 2 or 3 years are the norm. Its generally few landlords giving notice. We have about handful of tenants in the same property for 18/20 years.

If any legislation came in to force a longer fixed term for the benefit of the tenant there would have to be a corresponding benefit in kind given to the landlord ie a lower tax level etc/lower cgt etc.

Edited by superlightr on Wednesday 27th September 15:41

Edited by superlightr on Wednesday 27th September 15:42

Edited by superlightr on Wednesday 27th September 15:43

Edited by superlightr on Wednesday 27th September 16:10

[skwdenyer]

So we're clear, I haven't suggested 4-year fixed term tenancies. The nature of a secure tenure is that tenants may leave, landlords may not remove them. There will always be a minimum element and, yes, owners take that risk if they move overseas and then come back suddenly - they can always rent themselves until the minimum lease term is up. Can't have a risk-free world!

Also how many mortgage companies would accept >12 month tenancies? I realise there has been some change in this regard in the last few months - see http://blog.shelter.org.uk/2016/06/mortgage-lender... for instance - and restrictions are easing.

Of course, that's a bit of smoke-and-mirrors, as ASTs provide no security if the mortgage company repossesses - they can and do just throw out tenants at little notice (4 weeks per Protection from Eviction Act) - the term of the AST is in fact no encumbrance to the security at all. ASTs are not "proper" tenancies (they are not attached to the land), but are in law in fact merely commercial contracts between tenant and landlord, not binding on the mortgage company or a successor in title following a sale. Not a lot of tenants know that, of course, because the term "lease" is still used to describe the modern form.

In the wider sense, what we lose sight of is that these terms (short leases, no security) only really apply because there is so little bargaining power available to the individual renter who does not want to be homeless.

There are something like 5m BTL units in the UK, occupying something around 3.75bn sq ft. By comparison, there are around 8bn sq ft in commercial buildings in the UK.

Commercial tenancies have, on the whole, long fixed terms, many have security of tenure (and I'm not a fan of contracting out as it also destroys value for businesses), and periodic (but not usually every 6 months!) rent reviews.

Commercial leases are "proper" leases - they are an interest in the land, (by and large) binding on the mortgage company and/or any successor in title - pay the rent, observer the lease, and you cannot be removed.

An attempt to put commercial leases on the same terms as ASTs would be a disaster. Sure, a small proportion of tenants like "easy in, easy out" terms, but that's not the majority.

Individual householders don't have anything like the bargaining power of the commercial sector. Which is why they need to be protected by statute in the interests of a fairer, more equitable, more cohesive society - free markets don't exist. What we need IMHO is a fair market, not a free one.

[superlightr]

skwdenyer said:

So we're clear, I haven't suggested 4-year fixed term tenancies. The nature of a secure tenure is that tenants may leave, landlords may not remove them. There will always be a minimum element and, yes, owners take that risk if they move overseas and then come back suddenly - they can always rent themselves until the minimum lease term is up. Can't have a risk-free world!

Also how many mortgage companies would accept >12 month tenancies? I realise there has been some change in this regard in the last few months - see http://blog.shelter.org.uk/2016/06/mortgage-lender... for instance - and restrictions are easing.

Of course, that's a bit of smoke-and-mirrors, as ASTs provide no security if the mortgage company repossesses - they can and do just throw out tenants at little notice (4 weeks per Protection from Eviction Act) - the term of the AST is in fact no encumbrance to the security at all. ASTs are not "proper" tenancies (they are not attached to the land), but are in law in fact merely commercial contracts between tenant and landlord, not binding on the mortgage company or a successor in title following a sale. Not a lot of tenants know that, of course, because the term "lease" is still used to describe the modern form.

In the wider sense, what we lose sight of is that these terms (short leases, no security) only really apply because there is so little bargaining power available to the individual renter who does not want to be homeless.

There are something like 5m BTL units in the UK, occupying something around 3.75bn sq ft. By comparison, there are around 8bn sq ft in commercial buildings in the UK.

Commercial tenancies have, on the whole, long fixed terms, many have security of tenure (and I'm not a fan of contracting out as it also destroys value for businesses), and periodic (but not usually every 6 months!) rent reviews.

Commercial leases are "proper" leases - they are an interest in the land, (by and large) binding on the mortgage company and/or any successor in title - pay the rent, observer the lease, and you cannot be removed.

An attempt to put commercial leases on the same terms as ASTs would be a disaster. Sure, a small proportion of tenants like "easy in, easy out" terms, but that's not the majority.

Individual householders don't have anything like the bargaining power of the commercial sector. Which is why they need to be protected by statute in the interests of a fairer, more equitable, more cohesive society - free markets don't exist. What we need IMHO is a fair market, not a free one.

blimey a bit one sided this utopia then.

As you know commercial tenants generally have a full repairing and insuring clauses, why not do the same for home tenants? Oh because you say that would be a disaster - why?

so assume want home tenants to have a like a commercial long term security but not to have the insuring/reparing obligations and they can just go and leave at any stage say 2 weeks notice. remind me - what's the benefit for the owner? ah tax breaks and CGT reduction for social housing Yes? no - you don't even want to give a reach around for tax breaks I would wager?

[chow pan toon]

drainbrain said:

Of course Chow Pan Toon doesn't really understand how ASTs operate in practice or he'd realise they aren't successively rewritten. They roll.

I can assure you that I do understand exactly how they work here. How they work is that they are re-written every 6 months, at a cost, unless you want to go periodic and have even less security in your tenancy.

Maybe it is different where you are or maybe you're a professional landlord or deal with your tenants direct. Around here it is generally BTL'ers with a property or 2 leaving everything in the hands of the agents. It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

[superlightr]

chow pan toon said:

drainbrain said:

Of course Chow Pan Toon doesn't really understand how ASTs operate in practice or he'd realise they aren't successively rewritten. They roll.

I can assure you that I do understand exactly how they work here. How they work is that they are re-written every 6 months, at a cost, unless you want to go periodic and have even less security in your tenancy.

Maybe it is different where you are or maybe you're a professional landlord or deal with your tenants direct. Around here it is generally BTL'ers with a property or 2 leaving everything in the hands of the agents. It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

I can only highlight what we recommend to our landlords - our default on renewal is 12mths. about 80% of our tenancies are for 1yr.

[drainbrain]

superlightr said:

there is a high % of owners who have said this to us, then change their mind and decide to extend. One has been extending a 6mth let (cos of work) for over 18 years now.

tenants - we confirm that we will prepare a 12 mth tenancy and at the 9mth stage write to both parties to ask if they wish to extend. if the LL do and they do then we prepare another 12/6 or roll on etc.

We are here to let the property not to put people off. We can only guarantee the tenure of the fixed term and confirm the process of asking for renewal.

So, at the enquiry stage you wouldn't normally explain the owner's position? i.e. let the prospect know that the tenancy might well only be temporary because the owner might be back looking for vacant possession?

Well to me that's a car crash waiting to happen for both parties. And guess who's going to have to spend the time and resource to sort it out?

Edited by drainbrain on Wednesday 27th September 17:50

[drainbrain]

chow pan toon said:

I can assure you that I do understand exactly how they work here. How they work is that they are re-written every 6 months, at a cost, unless you want to go periodic and have even less security in your tenancy.

Maybe it is different where you are or maybe you're a professional landlord or deal with your tenants direct. Around here it is generally BTL'ers with a property or 2 leaving everything in the hands of the agents. It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

Y'know I shouldn't really get involved in these threads. Because they give me a bad dream that one day I'll wake up and find that it's not the way I think it's been over all these years and it's really a different way altogether like it is in the bad dream I read about in the threads....

Threads constantly pop up on PH about problems landlords are encountering with their properties/agents/tenants/rents/etc etc etc. Problems which are nonsensical and so simple to avoid or even remedy that they aren't really problems at all!! Many of them are problems which are about people who really don't know what they're doing. And this is quite understandable, although less so when the problem involves people who purport to be professionals.

See this current nonsense - and believe me it IS nonsense - about security of tenure in private residential letting? It is easily resolved.

1) Unless you only wish a short term tenancy, make sure that it is highly unlikely that the dwelling's owner is going to want to take vacant possession of the property. Of course, any good agent is going to make sure that if there's even a chance the owner might want to cease the let then any prospective tenant is made aware of this. Please don't ask me why or I will burst into tears.

2) Regardless of whatever good sense or nonsense is in a lease, just do the very very few things that the proper and normal conduct of a tenancy requires. Because if you do, then a magic thing will happen. The landlord will want you to keep the tenancy for as long as you like. Please don't ask me why or I will burst into tears. Just...trust me on it.

Residential tenants make their own security of tenure by the way they conduct their tenancies. And the only thing that can impact negatively on a well conducted tenancy is the st that can come up in life. And there is very little of even that that has to become any more than a temporary problem anyway. And it comes up just as much and as often for owners as for tenants, so swapping tenancy for ownership isn't going to change much problem wise.

Y'know people's circumstances change and they can't pay the rent so if they've a landlord who can't sort it they get evicted.

Y'know people's circumstances change and they can't pay their mortgage so if they've a lender who can't sort it they get evicted.

ad infinitum

[superlightr]

drainbrain said:

superlightr said:

there is a high % of owners who have said this to us, then change their mind and decide to extend. One has been extending a 6mth let (cos of work) for over 18 years now.

tenants - we confirm that we will prepare a 12 mth tenancy and at the 9mth stage write to both parties to ask if they wish to extend. if the LL do and they do then we prepare another 12/6 or roll on etc.

We are here to let the property not to put people off. We can only guarantee the tenure of the fixed term and confirm the process of asking for renewal.

So, at the enquiry stage you wouldn't normally explain the owner's position? i.e. let the prospect know that the tenancy might well only be temporary because the owner might be back looking for vacant possession?

Well to me that's a car crash waiting to happen for both parties. And guess who's going to have to spend the time and resource to sort it out?

Edited by drainbrain on Wednesday 27th September 17:50

We confirm that we can issue a 12 mth TA and will write to both parties to seek renewal. nothing is every guaranteed, if we know it may be long term then we can highlight that but even then it may not be. Car crash? - we are very diplomatic and good at the work we do so pretty successful so no crash and burns.

[Rovinghawk]

chow pan toon said:

It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

Suppose we agree a 10 year contract. I want to change the deal after 6 months- no chance. The tenant wants to go after 6 months- how the hell do I stop him? He'd have to lose an almighty amount of deposit to cover the rent shortfall.

How exactly am I more secure?

[chow pan toon]

Rovinghawk said:

chow pan toon said:

It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

Suppose we agree a 10 year contract. I want to change the deal after 6 months- no chance. The tenant wants to go after 6 months- how the hell do I stop him? He'd have to lose an almighty amount of deposit to cover the rent shortfall.

How exactly am I more secure?

10 years is the logical next step from 6 months. Well done.

[98elise]

chow pan toon said:

Rovinghawk said:

chow pan toon said:

It seems crazy to me that there isn't more interest from landlords in offering longer contracts. Surely the tenant & landlord are more secure, the only people missing out are the letting agencies.

Suppose we agree a 10 year contract. I want to change the deal after 6 months- no chance. The tenant wants to go after 6 months- how the hell do I stop him? He'd have to lose an almighty amount of deposit to cover the rent shortfall.

How exactly am I more secure?

10 years is the logical next step from 6 months. Well done.

It doesn't matter how long it is, the point being made is that a tenant can simply walk away whenever they want.there is no additional benefit for the landlord.

Ask any seasoned landlord how useful current contracts are when your tenant decides not to pay, trash the place, then walk away.

[drainbrain]

superlightr said:

We confirm that we can issue a 12 mth TA and will write to both parties to seek renewal. nothing is every guaranteed, if we know it may be long term then we can highlight that but even then it may not be. Car crash? - we are very diplomatic and good at the work we do so pretty successful so no crash and burns.

Ok, that's great, but in plain man speak, if some prospect phones expressing interest in the property do you say to them:

"before you view the place you should know that the owner's given us it on a 12 month contract while he's abroad working so there's no guarantee and every likelihood that he'll be back and wanting vacant possession of the property "

...or any words to the same effect ?

Edited by drainbrain on Wednesday 27th September 20:14

[Rovinghawk]

chow pan toon said:

10 years is the logical next step from 6 months. Well done.

Substitute any time period you like- nothing changes.

[superlightr]

drainbrain said:

superlightr said:

We confirm that we can issue a 12 mth TA and will write to both parties to seek renewal. nothing is every guaranteed, if we know it may be long term then we can highlight that but even then it may not be. Car crash? - we are very diplomatic and good at the work we do so pretty successful so no crash and burns.

Ok, that's great, but in plain man speak, if some prospect phones expressing interest in the property do you say to them:

"before you view the place you should know that the owner's given us it on a 12 month contract while he's abroad working so there's no guarantee and every likelihood that he'll be back and wanting vacant possession of the property "

...or any words to the same effect ?

Edited by drainbrain on Wednesday 27th September 20:14

As mentioned we confirm what we can do at that stage ie 12mths and that we will write to both parties at the 9mth stage with an aim of renewing. If it was just a 6mth only then yes we would but as mentioned a lot of LL even when its likely to be 12 mths only change their minds and do it longer so we keep it flexable and will write at 9 mths once both parties know what they are doing. 99.5% of our landlords are long term - very few are 6 and few just 12 mths so overall very few full stop and thus does not come up very often at all. I cant remember the last 6mth one tbh. must be more then 6/7 yrs ago.

tenants may well say same to us but again we ask what they want to do after 9mth and go from there. So much can change in a year anyway.

Edited by superlightr on Wednesday 27th September 20:44

Edited by superlightr on Wednesday 27th September 20:52

[drainbrain]

Is it not a lot simpler just to plainly explain the circumstances to them so that those only looking for short term (as so many are in an age of high mobility and fast changing circumstances) take it further, but others, hoping for something a bit longer lasting, say "o, right, that doesn't really suit me. Got anything else"?