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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.

Choosing Letting Agents / How the UK’s dopey banks made a mess of buy to let mortgage lending by David Lawrenson

Following on from last weeks’ blog, where I said landlords are not suffering too much, it seems that some landlords are suffering after all – even in the face of record low interest rates.
Latest figures from the Council of Mortgage Lenders now show investors’ arrears rates are significantly higher than for standard residential.
So, what’s the truth?
Well, the truth is there are landlords and there are landlords.
Unfortunately, lots of would-be landlords did not do their research and believed all the hype spun by the many Get Rich Quick gurus and have gone on to make a complete muck up of it – bankrupting themselves in the process.
Many of these will have been to a guru’s seminar and went out and either bought existing housing with No Money Down from distressed sellers using bridging finance with a back to back next day remortgage or they bought new build ghetto flats with gifted or hidden deposits.
Both techniques have finally been stopped as the UK’s rather dozy mortgage lenders finally woke up to the fact that they had in fact just lent on 100% of the property’s value (or at least what the buyer paid.)
(Many borrowers would also use credit cards and loans for non existent kitchens to finance deals.)
With little understanding about how to be a landlord quite a few of these would-be investors got into trouble - and therefore so did the banks and building societies that lent them the mortgage cash.
On the other hand, landlords and property investors who ignored the hype, hopefully the type who read my property investing book – and listened to informed experts of the likes of Richard Bowser, Tom Entwistle and myself at property shows will have done rather well.

BUT WHY WERE BRITAINS MORTGAGE LENDERS CAUGHT OUT ON BUY TO LET?
That’s a very good question.
At a recent seminar I heard from John Corey, an American property expert about how in the USA, the types of techniques that borrowers were pulling here to raise big buy to let mortgage loans in which the borrower had no equity, had long been known to mortgage lenders and had either been stopped by law or through the use of intelligent underwriting techniques.
For example, by requesting up to a years worth of bank statements the American lenders could really assess a borrower’s true financial position. In the USA, it would have been impssible to raise say, £25K on a loan for something else one month and then use it as a deposit on a house the next month.
But in the UK, these kinds of things and many other sneaky tricks went on for years.
I suspct that many mortgage lenders in the UK did not have a clue about back to back re-mortgaging as a technique for someone to acquire a property with “No Money Down.”
OK, by sometime in 2006 and 2007 they had all finally woke from their slumber and have now stopped this kind of thing.
But if you get a buy let mortgage loan today, you will still walk out of the bank with virtually no help, no guidance or anything else to help you be a good landlord.
Unless you have read the right stuff you will have a good chance of becoming another arrears statistic on their buy to let loan book a few years hence.
A few years ago I contacted some senior figures in some of the banks (not easy – even getting their names is hard enough) and suggested that as a leading property author I could help them correct this failing. I’m still waiting for the call back.

MIND IF WE KICK YOU AGAIN SIR?
Don’t tell my partner but I have subscribed for most of the rights issues in the shares I have.
Many of these shares are well down on what I paid for them, so it’s a bit like asking a mugger if he would like to hit you and rob you again.
But the shares are all very heavily discounted and I figure that after the RBS’s famous 200 pence a pop rights issue surely, no one would be allowed to put out a rights issue prospectus which was so clearly full of nonsense.

TIPS FOR USING LETTING AGENTS
Don’t go with the letting agent that charges the lowest fees or one who claims he can get the highest rent. It is important yes, but not the only thing that counts. If the agent says they can get a premium rent. Fine. Ask them to prove what rent they have achieved for properties like yours by showing you comparables.
Ask other landlords which agents they use and trust. Then check if the agent is a member of a recognised trade association such as The Association of Residential Letting Agents which has a code of practice for members and client money protection schemes in place. Others bodies offering similar protection include The Royal Institution of Chartered Surveyors and the National Approved Lettings Scheme.
Landlords should check what protection the agent’s membership of a trade body gives them and if the agent is really still a member.
True, there are some very good and long established agents who are not members of any trade body for good reasons - like the very high cost of membership.
If you are set on using one of these, that’s fine, but make extra sure to check references and find out how long they have been in business.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for both accidental landlords and more experienced residental property investors and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on renting out property 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 other than through the links we have on our affilate scheme page. Find out about some great deals we have arranged at our Property Affiliate page.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Foxtons letting agent renewal fee case - Latest from Lawrenson of LettingFocus

Do you remember the seemingly never ending case of unfair letting agency repeat renewal fees imposed on landlords by letting agents?
Well, landlord law guru Tessa Shepperon recently sent me an update on the ongoing case.
The background to the case that the Office of Fair Trading (OFT) has against Foxtons Ltd (the letting agents) is about their refusal to agree that certain terms in their letting agency contracts with landlords are unfair under the Unfair Terms in Consumer Contracts Regulations 1999.
One of these terms relates to repeat fees imposed on landlords where the initial fixed term in the original tenancy has come to an end.
Many a landlord (who never bothered to read the contract they signed with their letting agent properly) has suddenly woken up to the fact that their letting agent is trying to hit them for a further set of fees long after the initial job of finding the tenant has been completed.
One side issue in the case was whether any injunction brought against Foxtons could affect current letting agency contracts as well as future ones.
Initially, the first Judge had accepted Foxtons’ argument that any injunction about unfair terms could only apply to future contracts. Bad news for landlords!
But, we now had some good news because the Court of Appeal (bless their cotton socks) has now overturned this initial ruling, thus confirming the OFT's view that it can take enforcement action under the legislation to protect consumers in relation to existing contracts too.
Indeed, the Court of Appeal stated that the unfair terms legislation’s aim was to protect ALL consumers, never mind when the contract was signed.
LETTING AGENCY RENEWAL FEES AND LANDLORDS
What this means is that if you are a landlord with a letting agency contract with Foxtons, they should not now levy any charges under the disputed clauses on you until after the main action has been heard.
And, as you asked, the main action - i.e. on whether the terms in question are actually unfair or not under the regs – should be heard by the High Court in the week commencing 27 April.
You should be following this case if any letting agency has tried to impose renewal charges on you for finding a tenant long after the tenant’s initial term has ended.
Hundreds of thousands of landlords could be affected and letting agencies could face huge claims and loss of fuure cash flows if the landlords win this one.
We will keep you posted.
Update 10/7/9 - Foxtons has lost the case. Please go to: http://www.lettingfocus.com/2009/07/foxtons-loses-unfair-letting-renewal.html to read more.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Property Letting Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Landlords Book.
The new edition is for accidental and experienced landlords and 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 Letting Agents and Company Lets
I’m an expert property writer and property speaker - and I run the well known landlords blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting and consulting to anyone looking to buy property for themselves or to let out. I can 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 these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
Find out about some great deals we have arranged at our Landlords Links page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
Over on the right hand side under all the previous blog entries and the bit where it says “Links” and “Subscribe” you will see a button saying “Site Feed.”
You simply copy the site feed link into your News Reader or News Aggregator. Even a non techie like me managed to do 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 this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.
WANT TO ADD A COMMENT
To add a comment, you will need to click on “link to this post” then simply add your comment.
To view past comments you’ll need to click “link to this post” and view the comments which will appear at the bottom of the post.
All comments are moderated.

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ARE YOUR TENANCY DEPOSITS SAFE FROM ROGUE LETTING AGENTS ASKS DAVID LAWRENSON OF LETTING FOCUS

My last newsletter, which covered how Accidental Landlords are being ripped off by letting agents, generated quite a lot of interest from the press.
So I thought I would highlight another letting agency man trap which is just waiting for the new landlords to fall into.

If you use a letting agent and that agent handles the tenancy deposit for you, you ought to think carefully about what happens to that money.
All deposits taken under an assured shorthold tenancy which started on or after 6th April 2007 in England and Wales must now be protected in one of the various tenancy deposit schemes. For more on this read our article on Tenancy Deposit Schemes
If you use an agent, bear in mind that it is you, the landlord who is ultimately responsible for the deposit regardless of whether you have assigned responsibility for it to a third party like an agent.
This means that it is down to you, the landlord, to ensure that it is protected and the tenant is told where (and in which scheme) it is, within 14 days of receiving the deposit.
Any penalties that result from not protecting it properly are the final responsibility of the landlord.
If the deposit is protected in one of the insurance based tenancy deposit schemes (which do not physically hold the deposits) and your letting agent later goes bust, the insurance based scheme will ultimately look to the landlord to pay the tenant back on theit deposit (assuming that there are no valid deductions for damage, of course.)
Landlords should be under no illusions that the insurance based tenancy deposit schemes are a “client money protection scheme.”
They are most certainly not!

SO HOW CAN A LANDLORD PROTECT THEMSELVES AGAINST THEIR LETTING AGENT GOING BUST OR MISUSING THE DEPOSIT MONEY
Well, for a start, before they use an agent, they should carry out financial checks on that agent because letting agents are not regulated and can hold client money without any form of protection for the consumer.
So, use a letting agent or manager who is a member of RICS or ARLA – they do provide some form of protection for client money.
Other letting agencies may be part of associations that also make it a requirement for members to take out Client Money Proection Insurance cover. If they are, do a check that they are really still members and make occasional checks to make sure the insurance cover is still in place.
Not all agents may be members of a trade association but that doesn't mean they are rogues. If they are not in an association, find out how long they have been in business and ask neighbours what their repuation is like.
And if you are in any doubt, just hold the deposit yourself and make sure it is put into one of the tenancy deposit schemes. The National Landlords Association says that an agent cannot refuse this demand. Also, to be on the safe side, make sure rent payments are paid direct into your own account.
Want to add a comment - feel free. To read other comments that have already been added to this blog, you have to click on "Link To This Post"at the bottom. Then go to the bottom of the post to read the comments.
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 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 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.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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Letting Agency Fees Can Be Traps for Accidental Landlords says Letting Focus

Just the other day, I popped in to a local letting agent and was pretty surprised.
It was all very impressive with a posh waiting space and lots of young twenty somethings all busily taking calls at rows of high technology work stations. Wow! You don’t see that kind of thing in our local high street too much.
I was there to see if they could help me.
You see, right now I’m pretty busy preparing for my talks at the London Property Investor Show – the only property show that is worth bothering with. (You should go -see our ticket offer below)
So I thought, maybe this agent could take the time off my hands and find a tenant for a property that I have which have just become available.
As you may know, I usually do all this stuff myself for my London properties.
I find that finding and checking tenants’ references is easy for me because I know what I am doing and have done it a lot.
And in London, we have the blessed Gumtree.com free site to use to find tenants which works very well – as long as you remember to take a few pics of the property and keep refreshing your ad each day.
So, I asked the agent what their fee was.
“10% plus VAT” they replied.
OK, so far so good, but this is a bit like saying that a piece of string is, “Oh, so long.” In other words it is not much use at all.
“And what term is that 10% based on?” I asked.
“All our tenancies are for 24 months” was the reply.
Gulp. …..Now let’s see.
For this one bedroom flat, which was to rent at £758 per month, that is a cool fee to them up front of £2137.56. Crikey!
Now, let’s be honest, how many tenants do you get who come along and would willingly sign up to a 24 month term?
Not many. In fact, in all my 22 years of letting, I have never had one who wanted such a long tenancy.
For a start, they don’t know what you will be like as a landlord and 24 months is a long time to be stuck with a lousy landlord. But more importantly most tenants like the flexibility that renting gives them and would quite naturally like to be able to get out of a letting after 6 months. As a landlord too, you would be nuts to willingly sign up for a 24 month term because if you get a tenant who is, frankly a bit of an a**e you will want to be able to get rid of him a bit earlier than 24 months.
And unless, he was at least 2 months overdue on the rent or decides to run a brothel at the property or do something else of a nasty criminal nature, there is no sure fire way you can be easily rid of him if you have signed up to such a long term.

OPT FOR 6 MONTH TENANCY AGREEMENTS
That is why most sensible landlords opt for 6 month fixed term contracts which are extendable if everyone is happy after 6 months has ended – i.e. you simply agree to roll the same tenancy agreement on (it is called a monthly periodic tenancy)
After I walked away, I called this agency, this time posing as a tenant.
They explained about the 24 month thing - but only when pressed.
I queried why it was so long.
And the answer came back: “Sorry, all the landlords insist on it” which is, of course, is utter nonsense.
However, many new Accidental Landlords who have decided to rent out their home because they can’t sell it - will fall for all this – which is why letting agents like this one are trying to get away with it.
Oh, what happened in the end?
The next day, I let the property for nil cost using an advert in Gumtree. A nice lady tenant moves in next week.
And before I get complaints form letting agents reading this, I should say that not all letting agents operate like this.
Many agents in London and all the ones I have used for my Kent properties are sweeties and charge a fair rate for very good work.
However, there are rogues about – and some of the rogues are big names. So watch out.

OFFERS ON OUR NEXT EVENTS
Come to my next London seminar and networking meeting – details here… Property Seminar. Just email us at [email protected] and give us your full name – and that’s it. Then jst turn up and pay on the night.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of property investment expert lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 3 years has been the UK’s top selling property title - buy the UK's top selling landlord book.
It 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 buying property below market value.
I’m an expert property journalist, property speaker and a well known landlord blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords coaching
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentoring programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property investors coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
Look to the right of this blog and you should see my smiling profile. Then page down a bit and you come to where it says “Site feed” - click there and away you go.
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Please note if you 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” Please contact us via the Contact US button at our main site http://www.lettingfocus.com/ if you have any queries about this.

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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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