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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Buy to Let Mortgage Fraud by David Lawrenson of LettingFocus.com. Plus, the case for Letting Agent Regulation.

Well what a year that was.
Not for a long time (since the Great Crash of 1929 in fact) have so many financial institutions made such a muck up of the economy.
Amazingly some bankers, such as John Varley of Barclays, think that WE still think they know enough to listen to their predictions on stuff like houses prices.
Well, I have long since stopped listening to these guys, preferring instead to look at property price fundamentals and reality.
But I’m amazed that other financial journalists report the predictions of senior execs at banks as they have proved so hopelessly inaccurate over the last few years.
And on that topic, full marks to Rosalind Renshaw writing in the Residential Landlords magazine who flagged up how wrong financial institutions were with their predictions on house prices last year.

REAL DEALS ON HOUSES AT LAST
Over the last few weeks the estate agents that I am pals with have started to contact me with real mark downs on London property.
These mark downs have at last started to make house prices in the capital look sensible (You may know from previous blogs that I have not bought in London for 5 years as I have considered prices far too silly.)
In London, I reckon we are now only about 8% away from the bottom for LEADING INDICATOR house price indices such as that from the Nationwide and Halifax (which are of course based on surveyor valuations. Expect ASKING PRICES to fall at least another 20%)
In the rest of the country there is much further for house prices to fall as reality has still to catch up in many places. For example, a close pal in Rochdale reports that asking prices there have barely budged downwards. In areas like this the correction is coming soon and anyone thinking of buying in such areas would be advised to sit on their cash for a while longer, I think.

LETTING AGENTS NEED GREATER REGULATION
This year, as I have predicted in the FT and Daily Telegraph, many new landlords will have a very negative experience of letting at the hands of a rogue letting agent. The full article is here: New Landlords Risk Financial Penalties - "Financial Times" (There is also a longer piece on all this in the pre-Christmas “Investors Chronicle” where I am quoted extensively.)
Good letting agents, of whom there are many, have long called for greater regulation of their industry.
I predict that 2009’s experience will prove that there is a really urgent need for more regulation because many “reluctant landlords” will fall foul of rogue letting agents.

PROPERTY FRAUD IN BUY TO LET
In my next blog I will look at how the buy to let boom allowed what looked like legitimate property transactions to be turned into fraud and how genuine buyers and dim mortgage lenders lost fortunes in the process.
I’ll explain exactly how the shady property deals were constructed and how some conveyancing solicitors, mortgage brokers and surveyors helped frauds to take place through negligence and incompetence.
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property letting and investment blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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Are Letting Agency Renewal Fees Fair asks David Lawrenson of Letting Focus. We look at the Foxtons case.

A reader of this blog recently contacted me with a query which I’m seeing all too often right now. She had rented out a flat for the last four years to a tenant who was found by a big London Letting Agency. The landlord managed the tenancy herself.
The landlady paid the agent 10% for the first year of the tenancy and unfortunately had signed a contract to pay 8% for each year of renewal thereafter. (As you will know from other blogs posts my advice is to pay a generous up front fee and strike out any clauses requiring you to pay renewal fees where the tenancy is simply extended to become a “monthly periodic” tenancy because in these cases the agent does no real work to extend the tenancy!)
In this particular case, the tenant is now buying the flat – a result of a private agreement between the landlady and the tenant.
However, when the landlady informed the agent of this, they pointed out a clause in the tenancy contract which says, “In the event that a tenant or a third party connected with the tenant introduced by us, subsequently purchases the property, we will be entitled to a fee of 1.5% of the purchase price plus VAT.”
The landlady wanted to know if there was any way she could get out of paying this fee, or at least some of it.
She was shocked that it’s so much when they have done nothing apart from securing the tenant four years ago.

LITIGATION
The answer lies in litigation which is ongoing at present.
In the case of Foxtons Ltd v Pelkey Bicknell this year, the Court of Appeal said that it is not sufficient for an agent to introduce a purchaser to earn a sales commission. The agent has to be the effective cause of the sale.
The Office of Fair Trading (OFT) is also challenging, in the High Court, the agency, Foxtons' standard terms and conditions for letting properties.
The OFT believes that the Unfair Terms in Consumer Contract Regulations 1999 mean that some charges made by the agent are actually unlawful.
The case mainly involves the right for the agent to claim a renewal fee from the landlord if a tenant renews at end of the original letting period. But the challenge also covers commissions payable where a tenant buys the property.
This case seems to have been pending for ages and the outcome of the trial and any appeals may not be known for some time yet.
Some solicitors in the north west of England have issued county court claims for landlords for repayment of fees paid to agents in similar cases.
It may also be possible to issue proceedings in court for repayment of cash previously paid unlawfully on these grounds and claim interest from the agent too.
However, it may be better to wait until the result of the OFT case is known and don’t forget that you have up to six years to issue any claim in court.
According to my friend and legal expert Tessa Shepperson at the website LandlordLaw, another option could be to draw the letting agency’s attention to the Foxtons case and offer to pay any monies in dispute into a separate interest paying account to show good faith. Then, if Foxtons wins the test case then the money would then be paid out to them. If they lose, you get to keep it.
Please note we are not lawyers and this is a rough guide of the situation only and should not be relied on as definitive advice. We advise you to always take legal advice from a solicitor experienced in these matters.
Click here to read another short article by me about letting agency fees

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
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Our home blog page should then open & you should then see my smiling face at the top. Then page all the way down and on the bottom right it will say “Site feed” - click there and away you go.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included including also the links in the section “ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON”
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Letting Agents and Estate Agents Can Be a Pain Outside the Big Cities

I have just bought a property in East Kent, an area that is set to do very well once the fast new train lines are built in three years and the area becomes more commutable. Plus, I expect this area will be increasingly “found” by second home owners over the next 5 to 10 years.
I will admit though, that whilst I wait for the capital growth to come through, in the interim I will have to put up with some pretty low rental yields. (The gap between net (after cost) rental yield and true full financing costs is about 1 to 2 per cent in this area even if one bargains really hard and buys really cheaply!)
But I’m confident capital growth will more than make up for this low rent in the long term.
I mention all this because one thing that always astounds me is how utterly unbusiness like estate agents can be outside big cities like London and Manchester.

Agents in London Do Return Calls Eventually
OK, I know many in London are not too good but at least most do return phone calls - eventually.
I actually signed up with 4 estate agents in this particular town to buy a property (sorry, can’t say exactly where it is) and only one bothered to get back in touch with me or ever sent me any property details. It is just incredible.
And as I am finding out, they are not too keen to make money the letting side too. For example, I contacted and left messages with two letting agents to put the house on with them on Saturday morning. It is now Monday night and they have still not got back in touch with me.
So, if you want to make some money head down the M2, turn right down the A2 and become an estate or letting agent locally. You’ll make a fortune.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON

LettingFocus.com are the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” – which has been the UK’s top selling property and buy to let book for the last 3 years.
We help landlords and property investors make money in property by coaching them in ways that work and which are of minimal risk.
I have been a landlord and property investor myself for over 25 years.

At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as through occasional group seminars.

You should know that property clubs and property advice in the UK is still mainly unregulated and advice is often poor.
With no link to property firms, developers or bridging loan providers we at LettingFocus can give unbiased independent advice on where and what type of property to buy for investment, when to buy and how to buy property at a low price.
We also show you how to manage tenants properly and in ways that take up as little of your time as possible.

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