The Bad Landlords who destroy communities
This article is about the bad or incompetent landlords who destroy their local communities by failing to properly look after their properties.
I have a couple of properties in South Bermondsey in London. And the tale of how they have performed over the years is interesting.
One is a two bedroom maisonette flat (with its own front door to the street). (I never buy flats that don’t have their own access as I hate shared hallways, but that is another story).
This particular flat is on an estate which has always been well managed. There is a resident management company whose directors have all lived on the development for years and they are all reasonably active in running the management company. During the time I have owned my flat, they have sacked and replaced two block and grounds managers.
Some years ago, most of the flat owners extended their leases in a move that was managed by the excellent Leasehold Solutions (by the much missed, late Alex Greenslade). (Note: I would not not buy any leasehold property which was not ran well by a resident management company. For this reason most of my portfolio consists of freehold houses not flats, as few flats I’ve ever seen meet my criteria). The ground rent is low – about £120 a year.
So, in summary, a very good leasehold flat, valued at around a half million pounds and providing great returns in rent over the years.
500 yards away I have a two bedroom freehold house, which comes with a nice 15 foot little garden. This house, like the flat is in great condition. It has it’s own lounge, whereas in the maisonette flat, the kitchen is part of the lounge. The total floor space is about 7% bigger than the flat, plus it has it’s own garden, whereas the flat has no garden of its own. Both have their own parking spaces.
The current market value of the freehold house is also about half a million pounds – the same as the flat. Both rent for similar amounts. The flat appeals more to unrelated sharers whilst the house appeals more to couples or couples with one child.
Well, you are probably wondering why the freehold house is only valued for sale by the market at about the same level as the maisonette leasehold flat. It is bigger and it is freehold, so it ought to be worth more.
And you would be right. Normally, even if they had the same floor area, the freehold house ought to be about 10% to 15% more expensive to buy than the leasehold house. Also, the achievable rent should be about 10% higher too, mainly on account of there being a private garden, which people in central London are prepared to pay extra for.
So why the difference? And what has all this got to do with bad landlords?
Well, the reason for the difference in price is, in my view, directly due to bad landlords.
Good Management, Good Landlords
On the estate where the flat is, there are also a number of properties that are let. (The area is close to London and at the right price, places let fast). But the management of the estate is so good, that the landlords there are all kept to a certain standard. There are no dumped sofas or rusting bikes left on the street. There are no abandoned vehicles.
Discipline is enforced by the appointment of a caretaker who actually lives and owns a flat on the estate and who does a lot of the grounds management for a salary of about £4,000 a year. He is a real bonus. He knows everything that is going on. He knows if there is short term AirBnB letting happening (which is banned under the lease).
Plus, the external maintenance of the windows and the exterior decoration is carefully planned, regular and good value – and this all keeps the flats looking great visually from the outside.
This is all in marked contrast to the freehold house just around the corner.
The house, of course, has a good landlord – me! But it suffers because too many of the houses (and a few flats) around it have bad landlords who make no attempt to look after the exterior of their properties.
There is peeling paint and rendering on most outside walls. Most windows and private bin stores have not been painted in years. The utility boxes have all long since lost their doors or hang forlornly, half-on, half off. The same for the doors to the bin stores. The bins are often overflowing.
Any grassed areas in front of the houses are mostly unkempt and overgrown with weeds and bushes and are full of dumped litter that is never cleared.
Communal car park spaces are full of more dumped rubbish and sometimes, also untaxed, dumped vehicles (which the council will not remove because they are on private land which, in turn is not managed by anyone other than the uncaring house owners and their tenants).
I don’t doubt that maybe some of the nearby houses that are let are probably OKish inside, but the owners don’t seem to think too much about the exteriors. They have never heard of kerb appeal.
All this explains why the freehold houses like mine there, only sell for the same as the leasehold maisonette. It is annoying and it is frustrating.
Most of the properties near the freehold houses are let out. Mostly, they are owned by private landlords (though a few are owned by housing associations, who seem to have at some time in the past bought individual flats).
Landlords and The Community
OK, maybe they are not destroying the local community, but by their actions, or rather inaction, they have bought down the quality of the area, its look and feel. Their actions have made it a much worse place to live.
There is of course little that can be done about this. None of the things that they are doing are illegal. Well, maybe the dumping of old sofas etc. might be, but there is little hope of catching them in the act and even less chance of Southwark Council actually doing much about it, even when presented with evidence.
I have written to a few owners (where their addresses were available from the Land Registry) asking politely if they would clean up a patch of grass or remove an abandoned vehicle from their parking space. But I have never got a single response. The few good local owners I speak to know “the area is going down” but they are also powerless to do anything.
But home owners like this make me very cross. And I get even crosser that the worst offenders are usually private landlords who seem to not consider that they ought to be more active in improving things at their properties and making sure their tenants respect other people and the community in which they live. They fail to see that by looking after their properties better they would get better rents and their properties would be worth more too whenever they come to sell.
But the fact is, most of these landlords will be letting through letting agents who don’t care too. In this part of London, any half competent agent could let any old property, the demand being so strong. It is all too easy. The agents are fixated on getting places let fast and getting their fee. Most will give no consideration at all to the local area, the local environment.
And worst of all, these agent and the landlords they work for, give all the good landlords like me a bad name – and bring down on our heads more legislation, more rules, more regulations from government. Thanks a lot!
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