Internet update
In the UK the residential lettings market remains a cottage industry. While a number of publicly listed companies specifically invest in the sector, and the institutions have played a closer watching brief, the sector continues to be dominated by private individuals. The motives for investment in the sector are largely immaterial to this editorial; however, personal curiosity, a research interest and the continued press speculation on the prospects for the buy-to-let sector have led me to enquire further.
My starting point was to go to the bookshop and see what texts there were on the subject. Whereas a decade ago there were few texts, today there are several shelves full of books with tips on how to master the sector, not only in the UK but also overseas. The vast literature in itself says something on the sector. Those who have profited now seek to sell their tips for further profit. Browsing through many, you find that often they do not fully cover the subject. For those interested, I would recommend one, and that is The Which? Guide to Renting and Letting. It is a simple text, which covers all the important aspects,including legal issues, that a potential investor needs to know.
However, being an internet editorial, you do not wish to know about books. Rather what information is on the internet? Through my searches and reading I have started to uncover a fair degree of information that would help any prospective amateur, or even professional manager. Key to a successful buy-to-let investment is understanding the nature of the investment; the responsibilities of the respective parties and the key legal issues. With many individuals now investing in the sector, so consumer protection rises up the agenda which has led to a proliferation of information on government web sites.
Regrettably, there is no one-stop-shop, with different departments all having an interest. At the property level, the Office of the Deputy Prime Minister (www.odpm.gov.uk) provides a useful introduction to the subject. Selecting the “Housing” option and then the special section on “renting and letting”, you will find a wealth of information from both the perspective of the landlord and tenant. As a starting point, the section on “Booklets for landlords and tenants renting privately” is the best option and this will provide a list of various documents available to view or download – these include guides on the types of tenancies currently available (assured and short-hold), issues on fair rents, a guide to repairs and harassment and eviction.
The guide for landlords is comprehensive and available to download in pdf format. In already having a background knowledge of the subject area it is clear that the document has been written for someone with very little knowledge and is therefore a valuable document for both the amateur and more professional landlord alike. The leaflet covers setting up a tenancy, the rights and responsibilities of landlords, the termination of tenancies and issues of rents and subletting. A similar style guide is also available for tenants.
With residential tenancies being for short terms, the issue of repairing obligations is very different to those of standard commercial leases, with the burden falling mostly on the landlord. A more detailed guide on this area is also available from the list of publications noted above and this sets out responsibilities on repairs, but also covers issues such as gas appliances and furnishings.
The past 15 years have seen an increase in legislation relating to the letting of property, placing an increasing burden on the landlord (and rightly so) to ensure the premises are fit and habitable. These include regulation on furniture and gas equipment. Unfortunately, the ODPM does not provide detailed literature on these issues, which are covered by other government departments,therefore finding these documents can be tricky.
The most useful approach is to use a search engine, such as Google, as a means of quickly accessing these documents. For example, typing in “furniture and fire regulations” you will find within the first page of hits a direct link to the relevant guide on the DTi web site. Try doing this the other way, by searching the publications section on the DTi site and you are guaranteed to spend several more minutes! Despite being relatively short at 20 pages, the furnishings guide provided is very comprehensive and highlights what the regulations apply to, and includes examples of labels to aid identification. The same applies to gas appliances, where you can find some information on the Health and Safety Executive Web site. Unfortunately, several minutes of searching the British Gas and associated Web sites did not reveal much.
Beyond the rights and responsibilities of the respective parties, there is also a need to ensure that the contract is seen as “fair”. While the majority of contracts are on standard forms, they may offer the ability to add in other obligations and it is important to ensure that these do not breach the“Unfair Consumer Contract Terms Act 1999”. Again, typing this title in Google will provide a link to a guide on the DTi site which will explain in great detail what is fair and unfair. At nearly 70 pages, this is perhaps not the thing for most, though those entering in the area on a more professional basis and taking much greater control may find the document of use.
For many, investing in the sector is for a long term, providing a pension in years to come. Buying a second property and receiving income from this has tax implications, which the investor needs to consider. The Inland Revenue is the best starting point for this, and they produce documents on letting your home. It is worthwhile reviewing the documents available and discussing with the tax office particular issues before starting, especially if works need to be done which may affect your tax liability. Leaflet IR 87 “Letting and your home”is a useful starting point. Finding this document, unless you know what you are looking for, is not easy, as it is hidden away in the leaflets section under a“general” heading. Typing “letting” in the search engine is the easiest way!
A further useful web site is that of the Association of Residential Letting Agents (www.arla.co.uk),while the level of freely available information is limited. Nevertheless, for the individual wishing to let a property, the site does provide a search facility to find letting agents who are members of this organisation. It is worthwhile browsing this site for information.
Other general information is also available from the Council for Mortgage Lenders (www.cml.org.uk). While the CML does not provide specific advice for landlords or tenants, there are some general statistics on the growth in buy-to-let lending, and more recently a publication on “The profile and intentions of buy-to-let investors”. Worth a visit, for those with a research interest.
Other organisations with general information on the sector include Paragon Mortgages (www. Paragon-mortgages.co.uk). It produces a regular bulletin on rents and yields, which is of general use to investors wishing to monitor trends in the market place. Again, from a research perspective, the Joseph Rowntree Foundation(www.jrf.org.uk) may provide some useful information on the sector. The Centre for Housing Policy at the University of York (www.york.ac.uk/inst/chp)has a specific section on the private rented sector, with details of various research that has been undertaken. For those with a London focus, it is worthwhile visiting the Mayor’s site (www.london.gov.uk) where various publications on housing,including the rented sector, are available. The easiest way to navigate is to use the search facility. Type in “housing” and within the first few hits you will find a link to the housing section on the site.
As the number of books on the subject rises, so the number of Web sites increases. Not all sites will be of use, and my advice is to stick with the professional sites, though it is always worth glancing through the Web by searching under buy-to-let. Inevitably, the level of detail you get will not replace that in a book, which has to be a must for those taking a serious interest in the subject.
The views expressed are the author’s and not those of Jones Lang LaSalle.
Nigel AlmondSenior Researcher, Jones Lang LaSalleE-mail: nigel.almond@eu.joneslanglasalle.com
