Tag Archives: Assured Shorthold Tenancy

All That Glitters Is Not Gold!

As yet another marketing email drops into my Inbox extolling the virtual virtues of HMO ownership,  I’ve decided I can no longer stop myself from passing comment on the increased hype of HMOs.

The email came from an estate agent I sacked last year for being useless and, eight years ago, actually told me they wouldn’t touch HMOs with a barge pole.  Why then, did they send me and possibly a thousand other property investors on their target list, promises of glittering HMO yields?

The reason, I believe, must be this:  with the rise of online and high street letting agents all scrabbling to secure properties to let, margins are thinner as they compete to offer the cheapest headline service.  However, the fees to cover their operational costs (cars, staff, rates,) HAVE to come from somewhere so they divide and spread their costs.  Here are some examples of fees levied to the tenant and landlord before a let has begun: Continue reading

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Filed under Management of an HMO

How The Market Is Changing

From where I’m sitting, this is purely subjective of course. Having run HMOs for 7 years and I’d only planned to do it for 5 years, reckon I’m now a couple of years past retirement. The plan had been to squeeze as much yield out of them as possible, sell at a profit and do something else. As a plan it had strategy, goals and optimism but, in reality, it was nothing better than a property wealth creation course pie-in-the-sky unsubstantiated greedy wish.

Instead, thanks to the recession and divorce, I have a niche business, constant room demand, an appreciation of real life on minimum or no wage and a set of tenants whom I couldn’t bequeath to another landlord with a clear conscience (on both sides).

What do you mean The Market is changing?

From 2007-2011 every tenant which arrived on the doorstep came armed with a good sob story, housing benefit papers to sign, could be found on any benefit database under several addresses and, if I was really unlucky, on a few police databases as well. Apart from Paul and Andrew in recent times, everyone else has pretty much kept their nose clean (to my knowledge). I suspect a couple are up to some dodgy deals and workings but we need a few in society just to keep the police on their toes and prove we still have freedom of movement (Yes, I do believe Big Brother will be a reality in my lifetime).

Perhaps I’m getting better at filtering advertisement responses? Immediate “no”s are: Continue reading

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Filed under Tenant Stories

Why I Can’t Afford LHA Claimants Any More

Five years ago, the prime room rental market was students and people in receipt of Housing Benefit.  Put an ad in the paper and 9 out of 10 respondents were those on housing benefit – probably a key reason that so many fellow landlords stuck their nose up at me saying I was “mad” and “do you want to make life more difficult for yourself?”.

Housing Benefit vs LHA

I liked Housing Benefit claimants: they tend to stay longer, were satisfied with their environment and, as they were home much of the day, kept an eye on the comings and goings of the house.  Once you understood how the system worked, the claim process was relatively straightforward: upon production of landlord evidence of a room offer the tenant would approach our local Housing and Legal Aid Centre and a cheque for four weeks advance rent was made payable to the landlord.  The tenant would then fill in their part of the claim form and the landlord would fill in the other parts including their bank details for the benefit to be paid into.  We’d sit back, wait and within 4-6 weeks the rent was paid direct into the landlord’s account regularly.  If there were any queries, I’d call the Housing Benefit team (I knew each agent by their first name), find out at what stage the claim was at or if they were waiting for any more information so I could chase the tenant.

Under the LHA system, the process is no longer so transparent.  The tenant can make the claim, the landlord fills in what’s included in the rent and, even though the tenant signs permission for the landlord to discuss the claim, that is the last I’ll see or hear until the tenant hands over the money.  I’ve tried to chase a claim only to discover that the call centre had moved to Slough (nowhere near us) and, despite being allowed to discuss it, the staff couldn’t give me any information “under Data Protection” and “You’ll have to ask the tenant yourself”.  I want to scream down the phone “I bl***y well would if I thought I’d be getting a straight answer and was prepared to camp outside their room all night until they got home!”.

Why LHA Doesn’t Help Tenants

My tenants don’t mean to not hand over the LHA payment, but when their bank account is in the red, they have no mobile credit, possibly haven’t eaten for a while, eeking out their tobacco pouch so their roll up resembles more Rizla and saffron strands than a good smoke, I empathise with their temptation to hand over £150 rather than the £200 paid by the Council.  In their heads (especially if they’ve recently been working), 50 quid is easy to reimburse within the next couple of weeks.  Then the reality sets in that there’s no financial room to manoeuvre: skimming £20/£30/£40 off the LHA payment to cover the shortfall of Job Seekers Allowance means they end up £300-£400 in arrears before you know it and start to get stressed.   At that point, they do what most of us do when we get stressed – drink more, smoke more, blow whatever cash is available because, let’s face it, it can’t get much worse.  Their girlfriend/boyfriend, friends and parents are probably financially exhausted, they’re drowning in debt, despondent from hitting a job wall – so what if they fall out with their landlady on top?  Life is so chaotic we’ll string her along with a few well honed excuses that used to work on our mothers and teachers.

Greg is £500 in arrears and I don’t want to see him homeless but this is what’s happened to him.  When the process starts I meet with the tenant and explain that this is what will happen and, in order to avoid it, we have to work together.  I’ll happily reduce the rent to reflect the LHA payment provided that the LHA is handed over as regular as clockwork.  “Yeah, yeah, yeah, I promise.  It won’t happen to me and I’ll be working again soon.”  I’ve experienced this time and time again.  The most common excuse is “Housing have messed up my claim AGAIN” – and I can’t check out its validity.

Back to Basics – The Real Reason for Housing Benefit

The market’s changed.  For every ad I place the majority of calls will be from working professionals who have chosen an all-inclusive rate so they have enough salary left over to have a life.  I no longer need to fill the rooms with the slightly odd, vaguely desperate or those that fall out of society’s moral code of conduct.

Back in the late 1940s the Social Security System was so named because:

SOCIAL                 def pertaining to human society

SECURITY             def freedom from danger, risk, etc; safety

There are still at least 1 out of 10 callers wanting a room who won’t pass the referencing process, can’t get the deposit together or will struggle to conform to a landlord’s ideal tenant.

My business head tells me to go with this new professional market demand and fill the houses with law abiding, rent paying via standing order tenants who read and abide by the AST and wash their sheets weekly.  My life will be calmer yet poorer through the lack of tenants educating me on the true meaning of survival and refusal to conform to society’s expectations.

Please, bring back direct payments to landlords so our business heads no longer discriminate against the unemployed.

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Filed under being a landlord, Future of HMOs, Rent