For many landlords, their broker is the first point of call when they run into rental difficulties. Paula Hebberd, solicitor at Moore Blatch, runs through what advice brokers can offer.
For many landlords, their broker is the first point of call when they run into rental difficulties. Paula Hebberd, solicitor at Moore Blatch, runs through what advice brokers can offer.
Whether it is running into an unforeseen temporary void period or worse a prolonged void due to tenant issues, landlords often turn to their financial adviser for help.
Unlike residential mortgages, lenders are much swifter to take action when buy-to-let mortgages are unpaid as can be seen in the repossession figures.
While relatively low, landlords still saw 42,728 properties possessed by county court bailiffs in 2015, an increase of 2% compared to 2014 and the highest annual figure since 2000.
Given the reduction of tax relief available to landlords from next year, many landlords may not have the financial cushion that they previously had and while they may have seen significant capital appreciation, this doesn’t help mortgage payments unless the debt is restructured.
Our advice if a client contacts you is fairly straightforward.
Firstly, get them to act swiftly.
In other words as soon as the tenant defaults issue a section 8 notice.
By all means continue amicable negotiations but get the process started as it can take up to six months or longer to evict a tenant.
Factoring in the inevitable repairs, decoration and time to find a new tenant, you could be faced with an eight to 12 month void, plus extra costs.
Make sure your client buys landlord legal and rent protection as its cost is as little as £12 to £50 a month and it can save landlords a fortune.
If it’s too late for this, then get your client to shop around for legal help.
Not only will the specialist providers often be cheaper but more importantly they will have experience of the worst case scenarios, which in our experience are the ones that end up in repossession.
Be brutal and warn your clients of the possible issues as those highly dramatic TV programmes covering the tenants from hell are sadly a closer reflection of the norm than many landlords believe.
Explain that tenants have rights and most are fully aware of them.
So, regardless of the fact that a tenant is blatantly not paying they will still hold the landlord to ransom through tenant counter claims if for example they have failed to carry out repairs on their property.
One of the big issues is psychological - a tenant in dispute can act out of character and, while a complete trashing of a property may be rare, situations which can be almost as costly are common.
Tenants can fail to do anything about water damage, vandalise property or fail to ensure reasonable upkeep.
A final word of caution for your client is that ‘greed’ is not necessarily good.
In a climate where demand for rental properties is outstripping supply, it is tempting to get carried away and take on too many properties.
We regularly see cases where a snowball effect can occur rapidly and when the margins are fine, multiple loans can be impacted.
