Over the past 10 years, buy-to-let investors have flocked to Cambridge in the expectation of strong rents and impressive capital growth, driven by huge tenant demand and lack of supply. However, while rents have remained strong over the past year, we have seen a slow down in the rates of capital appreciation. Investors chasing a fast buck are likely to be disappointed. This doesn’t mean the Cambridge BTL market is broken, it just means a short-term investment strategy is no longer a viable option.
According to the most recent Home Track report (February 2018) values in Cambridge have dropped 1.5% year on year, but will this have an affect on the rental market? In the immediate short term, likely not, but if this becomes and ongoing trend, those property owners considering selling up, may hold off until prices see an increase. This in turn will affect the stock of properties to purchase, possible pushing people to rent until they find their ‘dream home’ but also pushing buy to let investors in purchasing while prices are down.
The average rent in the East of England, at the end of 2017 was £909pcm, in Cambridge this was £1202pcm (Landbay, Rental Index Report). Cambridge is still a microclimate, offering a unique setting for the housing market. So why does Cambridge stand out and what part do Landlords need to play in keeping these rents at this level?
Over the next three years, around two million sq ft of office and laboratory developments will be delivered in the Cambridge market. This is on top of the multinational companies, such as Astrazeneca, Google, and Microsoft who have already called Cambridge their home.
The increased investment in infrastructure is also increasing the rental demand as more areas of the City become popular for commuters; such as the Cambridge North train station, improvements to A14 between Cambridge and Huntington and proposed plans for a Cambridge South train station.
New developments such as Ninewells and Eddington, together with some impressive high spec refurbishments of existing stock has improved the overall standard of properties in Cambridge. Older properties can start looking more dated in comparison to the newer developments so keeping up with maintenance is key. Larger companies in the City are attracting affluent young professionals and families who expect their homes to be well-presented and maintenance free in exchange for the high rents they are being asked to pay. Landlords must keep up with these expectations to ensure the strong rents continue. As Letting Agents, we need to ensure our clients' property stands out from others on the market, giving the best possible chance of achieving the expected rent level, with a minimum void period.
Looking ahead, we expect clearer answers to the key questions. Will the changes to stamp duty for first time buyers reduce the young professional renters or the length in which they rent? Will the changes with tax relief on mortgage payments reduce the buy to let investors and therefore rental stock, ultimately leading to an underpinning of rental prices as supply drops but demand remains steady? Will the uncertainty with Brexit hold people back in buying and push them to rent until the landscape is more certain? Only time will tell, but what we do know is the Cambridge market continues to need supply to meet the demand. This supply just needs to be of a higher standard, to meet the increased expectations of tenants.
In previous cases, fines against landlords end up in the pocket of HM Treasury. For these new regulations, any fines imposed on landlords will be for the Local Authority to keep, the hope being, that with a direct financial incentive, LAs will be focussed on outing the issues.
Given how early we are into the new regulations, their success at improving standards remains to be seen. However, it’s the latest of a number of ‘sticks’ the government have been using on landlords and one that could have a severe impact.
A database such as this isn’t new, as a similar one has already been introduced into the London property market by Mayor Sadiq Khan. This database allows anyone to check whether their current or prospective landlord has been prosecuted or fined by a number of London Borough Councils. Just type in the landlord/agent name and the property address and away you go. The database proposed by the Housing and Planning Act 2016 is currently not intended to be publically available, unlike the London database, and more as a tool for Local Authorities. The offences that can lead to being on the database or being faced with a Banning Order include but not limited to:
- Unlawful eviction or harassment
- Failing to comply with an improvement notice
- Offences in relation failure to comply with HMO Licensing requirements
- Fire and Gas safety failures
Local Authorities therefore have two wins from the introduction of these regulations. Increasing standards of rental properties as landlords wish to avoid a Banning Orders, or receiving fines from those landlords who do not undertake these works. If a Landlord fails to pay the fine, a charge is put on the property.
This is indicative of the general theme running through the industry at the moment where there are many more examples of government using ‘stick’ rather than ‘carrot’ regulations to encourage desired behaviour from landlords. There of course would not be any argument against the move to improve standards, but the proposed set up has the potential to affect all landlords and not just those with genuinely poorly maintained properties.
Section 11 of the Landlord and Tenant Act 1985 details the scope of the obligation and helps define who is responsible for what repairs and maintenance. This should also be detailed in the assured shorthold tenancy agreement (AST) between the two parties.
Section 11 breaks down the landlord’s obligation to repair and maintain:
- The fabric and structure of the property – This includes the roof, walls, ceilings, gutters, downpipes etc.
- The supply of services to the property, including sanitary ware – this includes electrical wiring, gas pipework, baths, basins, sinks etc.
- The supply of space heating and hot water – The landlord is obligated to maintain boilers and appliances that supply heat to the property, as well as hot water
In order to fulfil this obligation, the landlord has an implied right for access in order to repair and maintain as necessary. This is backed up by section 11 (6) of the Landlord and Tenant Act 1985 which confirms the landlord is allowed access for these purposes. Note, however, the tenants right to deny access overrides the above, and if the tenant refuses access the landlord must not attend and must seek court permission to do so.
The Landlord is expected to repair the property, or replace items, bearing in mind the age and condition of the property, or the item to be replaced. The tenant cannot expect betterment, nor should they be expected to accept a replacement that is of lesser quality or specification than the original item.
It’s not an uncommon occurrence when there are disputes between the two parties for Landlords to hesitate to undertake repairs – almost as a bargaining chip. This is a fundamental breach of section 11 and could have serious consequences going forward. It will leave the landlord in a much worse and weaker position.
Of course, there are obligations on the tenants as well, usually detailed within the AST. These include obligations not to damage the property, maintain any gardens, repair or replace any items they have broken or damaged etc. Tenants are further expected to behave in a “Tenant like manner” which is a description put forward by Lord Denning in Warren v Keen 1954. There is a little confusion regarding what exactly this means, but basically it means that there will be certain things that a tenant is expected to take on as part of being a tenant – changing lightbulbs, unblocking sinks, mowing the lawn i.e. everyday remedial issues.
Tenants are also obliged to report any issues as soon as they arise. If the tenant fails to report faults when they knew, or should have known, about them, and as a result the property is further damaged, the tenant would be responsible for the extra cost of repair. This damage is known as ‘permissive’ damage’.
Similarly, tenants should not be withholding rent in the event of repairs that they perceive to be necessary not being undertaken. Rent payment is a fundamental obligation of the tenant and knowingly failing to fulfil this – for whatever reason – could actually cause more problems later on.
If both sides are fully informed and aware of their rights and obligations prior to entering an AST, then its far less likely that there will be issues or disputes between the parties.
Redmayne, Arnold and Harris is an ARLA (Associated of Residential Letting Agents) regulated agent, and have been for many years. In addition to this, we have several members of the Lettings Department who individually, are ARLA qualified, having passed industry exams and continuing with training as part of professional development. This ensures our staff are fully up to date on industry changes.
Whether you are a Landlord or a tenant, here are our top 7 reasons why using an ARLA regulated and qualified Agent to manage your property, will leave you and your property in safe and trustworthy hands:
- ARLA registered agents are covered by the ARLA Client Money Protection Scheme, protecting landlord and tenants rents and deposits. If your agent isn’t ARLA and were to declare bankruptcy, or deal on the wrong side of the law, your money’s gone and you’re on your own!
- Any ARLA agent must have Professional Indemnity Insurance, giving landlords and tenants peace of mind in the unlikely event of negligence or bad advice.
- Our ARLA qualified members of staff are required to be trained and qualified in addition to following a structured programme of Continuous Professional Development skills – keeping their industry specific knowledge up to date.
- All ARLA agents voluntarily adhere to the Code of Practice and Rules of Conduct for their professional body, which means they trade to the highest possible professional standards.
- If something were to go wrong with an ARLA agent, you know you have an option to redress the situation by taking the matter up with ARLA.
- All ARLA Agents are regularly updated with government legislations, including important safety checks such as Gas Safety Certificates and Smokes and Carbon Monoxide (England) Regulation 2015.
- ARLA offer continuous support to registered Agents in the form of regular regional update meetings and a direct helpline to a team of solicitors, specialising in the lettings industry.
Published: 25/05/2017 Last Updated: 25/05/2017 09:22:20 Tags: Lettings
To read the full report in the Cambridge News click here