Landlords Hoping for Capital Appreciation Should Focus on Eco-Credentials
As environmental concerns creep up the priority list of tenants and buyers alike, the latest report from Hive and Rightmove is just the latest to show the long-term benefits of offering eco-friendly properties as a landlord both in the short and long term.
While there will be some landlords quick to dismiss news of eco-consciousness as post-Greta propaganda, there are robust studies (including this study of Australian renters) dating back to 2015 which indicate a growing environmental concern in tenants, followed by research in 2018 from Your Move which showed that 42% of tenants expressed that environmental issues influenced their property decisions, and further research from Centrica in July 2021 which found that upwards of 90% of 2000 surveyed in Scotland believed that carbon neutrality was important to them.
What this means for Wirral landlords
Environmental concerns are likely to grow in importance over time – especially as various Paris Climate Accord deadlines approach and global awareness is raised. However, while competition between landlords to offer the most environmentally friendly properties may be some way off, there is a more immediate benefit in being able to offer a property with a higher-than-average level of energy efficiency.
While current governmental legislation has required a minimum band-E EPC rating since April of 2020, there are clear benefits to the tenant from a better rated property – and with the relaunch of the UK government’s ‘Green Deal’, there are methods of making improvements to the property which are tied to the improvement itself rather than the landlord.
There are also reasons to believe that the minimum requirement for the EPC will increase to band-C from 2025 (for new tenancies and from 2028 for existing tenancies). As such, landlords may be faced with needing to improve from E to C with little notice, making it necessary for landlords to make large investments in their properties. As such, it will benefit landlords to begin the process now in order to take full advantage of the intervening 4 years.
While there are also calls for the government to introduce a replacement to the previous LESA (landlord energy savings allowance), there have been no indications that this will happen in the short term – though these things tend to have some limited allowance for backdating, so may well retroactively cover improvements made in the coming years.
The possible options for property owners go further than new insulation or heating systems, however, and there are and increasing number of ways that property owners can go above and beyond when it comes to making a difference. For example, a spokesperson from British Gas – parent company of Hive – had this to say:
With the ban on new petrol and diesel vehicles on the horizon, many people are considering how to make the switch to electric. And as we head towards net zero, it’s likely that smart charging as part of a wider home energy eco-system, will increasingly become the norm, as people look to make homes more sustainable.
What should Wirral landlords do?
There is no legal requirement for landlords to act immediately, nor is there any firm data on the impact of environmental friendliness on void-time or rental expectations. However, legal requirements for rental properties are certain to become more stringent over the next five years and early indicators suggest that environmental considerations are of growing importance to tenants.
For this reason, we would suggest that it is better to begin the process of improving your portfolio’s EPC ratings sooner rather than later to avoid being faced with a large one-time outlay or the possibility of what, according to the consultation document which outlines the 2025 deadline (amongst other things), could be a £30,000 fine for non-compliance.
Landlords, like the rest of the population, are familiar with the dangers of climate change – but have historically had to make business decisions on various improvements – however, as the regulation becomes stricter and the options more widespread and less expensive (and with the previously mentioned Green Deal and other incentives such as the Domestic Renewable Heat Incentive available), landlords can be increasingly confident that their business and environmental concerns are aligning.
Need help sourcing an EPC or finding the right partners for improvements? Contact Us today to talk to one of our expert team and see how we can help you to get ahead and stay ahead of regulations – environmental or otherwise – and help to take the pain out of portfolio management.
Tenant Fees Act Hits the News – Are You Operating Within the Law?
The pandemic has raised plenty of issues between landlords and tenants – many of which have come as a result of unscrupulous private landlords and tenants alike – have seen an increase in press coverage for stories such as a recent claim against a landlord over a death from pneumonia but, in truth, the vast majority of landlords should have little to worry about.
What is the Tennant Fees Act?
Introduced in 2019 and coming into effect in June of 2020, the Tenant Fees Act serves to ban letting fees and to cap the deposits paid by those tenants renting from private landlords in England. Aiming to reduce the cost that tenants can face both at the outset and during the course of a tenancy, the act serves to allow tenants to see, at a glance, what a property will cost.
Who does the ban on fees apply to?
The ban as represented by the act applies to all assured shorthold tenancies, tenancies for student accommodation and to licences to occupy housing in the private rental sector in England.
What fees can be charged?
The fees that can still be charged as of June 2020 are, simply, those essential for the proper letting of a property – and are as follows:
- Rent – a regular, agreed upon amount at agreed upon intervals. It is prohibited to charge a larger amount for the first month’s rent in order to cover any costs. The whole cost of the agreed period should be evenly split across the duration of the tenancy.
- A refundable tenancy deposit – this is a deposit which will be placed with a Government Custodial scheme DPS (Deposit Protection Scheme) which is capped at no more than 5 weeks’ rent (or 6 weeks rent if the annual rent is greater than £50,000).
- A refundable holding deposit (to reserve a property) – capped at 1 week’s rent
- Payments associated with early termination of the tenancy – if requested by the tenant,
- £50 (or reasonably incurred costs, if higher) can be charged.
- Payment of utilities, communication services, TV licence and Council Tax
- Early termination – if a tenant requests to leave before the end of their tenancy, an early termination fee can be levied – this cannot exceed the financial loss a landlord or agent has suffered in permitting the tenant to leave early.
What this means for Wirral landlords
As ever with this type of story, the news will grow as tenants begin to win cases against landlords that have breached the conditions outlined in the act. However, most landlords will have been acting in accordance with the standards set out in the act for longer than the two years since it was announced. Where it may be a concern for some landlords is in situations where legacy charges have been carried over during renewal for longer tenancies.
As the act rendered all additional charges ‘prohibited payments’ from the 1st of June 2020, there may be situations where prohibited payments may have been collected during the period since the beginning of the act’s enforcement. In these situations, the payments taken in error should be returned to the tenant as soon as the error is discovered to prevent the possibility of court action and the penalty of a year’s rent (in actual fact, there are possible financial penalties of up to £30,000) being applied.
If you’re worried about the shorthold agreements currently in place with your tenants, or any other legal documentation, you can Contact Us to see what we can do to help you with this – or any of the many other legal queries that can arise in the course of successfully managing a property portfolio.
Zoopla’s 2021 Q1 ‘UK Rental Market Report’ Analysed
The Zoopla report carries variations on a theme, and is similar in many ways to the HomeLet report covered last week – however, in addition to data on rent as a percentage of average income (with the North East again mentioned as offering the most affordable rents), there is some useful information in there on the possible developments we might see over the coming year.
What the report shows
The executive summary gives six main takeaways from the report, they are:
- Three distinct markets are emerging in UK rental market: the wider commuter zones and beyond, major city centres and London
- Across the UK outside London, there is strong rental demand amid constrained supply and rents are up +3% on the year
- Three English regions & Wales are recording the highest rental growth since March 2011
- Rental demand is building in city centres as lockdown eases and offices start to reopen
- In London, rental falls eased in Q1, with rents down -9.4% in the year to March, compared to -10% in the year to February
- Rental demand in inner London boosted as monthly rents in several boroughs hit their lowest levels since the index began in 2011, dramatically increasing affordability
As with the HomeLet report, there’s little that will come as a major surprise to Wirral landlords – there is upward pressure due to constrained supply in commuter zones which has led to increases across the region.
However, the data may come as a surprise – there was a 32% rise in rental demand over pre-pandemic levels, but a 5% reduction in supply over the same quarter in Q1. While the shortfall will be eased as some proportion of the population looks to move back to city centre property, there is still likely to be a significant gap between supply and demand.
Caused by many of the same issues as the shortfall in properties available to purchase (the relocation for space, as mentioned in coverage of previous reports), the rental property gap is also contributed to by smaller and single property landlords exiting during the last year. With rental demand tending to peak in the mid-late summer, there is likely to be further upward pressure for rent.
While the property market is a little uncertain (as all things are) as we begin to see the end of the pandemic on the horizon, there are reasons to be cautiously optimistic – especially for Wirral landlords that can expect to see a steadily high demand, low re-let times and with a host of potential regeneration projects adding value to the region.
With 2021 unbelievably nearing its halfway point, it is still difficult to say for definite what the second half of the year has in store, but there is growing evidence that there will be continued growth as the UK adapts to life post-pandemic. While there may be fewer sales after the stamp duty holiday ends, there will remain plenty of opportunities for investment and reason to expect a steady yield from properties in the region.
Need some help keeping up with the rapidly changing UK property market, or help managing or growing your portfolio? We believe that the role of a letting agent is to be up to date with the latest information to help best represent our landlords’ interest. Contact Us today to see how we can help.