Leicester Property Related News

A brief insight into the UK property market can be read below. This news page will be updated weekly. To subscribe to news directly to your inbox simply email news to; info@skybluehomes.co.uk.

Week Commencing 6th February 2012

Sale and rent back' sector closed down by FSA

The sale and rent back industry has been almost completely closed down, says the Financial Services Authority. Nearly four years after regulators first responded to complaints, the remaining firms have stopped selling the controversial deals.Distressed home owners would sell their homes at a discount to firms that then promised to let them stay as tenants.

The FSA said most deals ”were either unaffordable or unsuitable and never should have been sold”.
The Office of Fair Trading (OFT) investigated the industry in 2008 after tens of thousands of home owners sold their homes to companies offering them tenancies as an alternative to being repossessed.

The regulator estimated at the time that about 50,000 such deals had been struck, and concluded that the industry, which had more than 1,000 firms involved, should be regulated. The OFT found that home owners who entered such deals might be cheated if they were misled into believing their tenancies might last for a long time, or if their rents were subsequently increased to levels they could not afford.

The FSA took over formal regulation of these businesses in 2009 and has, in effect, scared most of them off.
Since then there have only been 61 such sale and rent back transactions.
Rules brought in by the FSA in 2010 laid down that any new deals had to offer a tenancy lasting at least five years. Only 22 firms stayed in the market, but the FSA said that one way or another they had now all stopped doing business.

”The FSA has referred one firm to its enforcement division while others have either stopped taking on new business or cancelled their permissions,” the FSA said.
”Effectively, this means the entire sale and rent back market is temporarily shut,” it added.
Fraud
Despite new rules and formal regulation, a subsequent FSA investigation of the 22 authorised firms starting in March last year found a litany of failings and poor practice that had continued to put customers at risk.
Among the problems had been inappropriate and unaffordable deals, failure to discuss key facts with customers, incorrect information, breaches of the FSA's rules on financial promotions, and poor training, record keeping and levels of competence.
Nausicaa Delfas, of the FSA, said: ”The resulting temporary closure of this market could have been avoided if sale and rent back firms had taken the time to fully understand their regulatory responsibilities and customers' needs.”
”It seems most were more focussed on their own commercial success rather than the welfare of the customers, with one firm even resorting to fraud.”

London council launches lettings management for private landlords

A local authority has launched a full-management lettings service for the private rented sector. It was already offering a tenant-find service.

Harrow Council in north London claims that it is the first full-management lettings service to be run by a local authority in the city.

It will find tenants, manage and inspect properties, and guarantee rent with up to three months of payment in advance.

The council says that the aim is to bridge the gap between the high demand for social housing and the lack of available homes, whilst giving landlords a guaranteed return on their property.

The new service is in addition to the council’s existing Help2Let scheme, which matches residents on the housing waiting list with private landlords looking for tenants and whose property meets certain standards. Landlords pay for the service, which has so far found over 200 tenants.

Councillor Bob Currie, portfolio holder for housing, said: “With major pressure on housing services, the private rented sector has become more important than ever. We are working with landlords in Harrow to create more choice for our residents.

“By supporting and boosting this sector, we can also drive up standards in the rental market. We are building up a database of available, decent properties in the area.”

Deposit scheme publishes new guide for landlords and agents

Tenancy deposit scheme mydeposits has released an online checklist for landlords and letting agents to help them in any dispute with their tenant over the return of the deposit.

The checklist gives guidance to landlords and agents on what to do before, during and at the end of the tenancy to ensure they have the right evidence if a dispute arises.

While formal disputes are rare, they are usually caused by issues such as cleaning charges, unpaid rent and damage to the property or its contents.

Eddie Hooker, the scheme’s chief executive, said: “This checklist covers everything a landlord needs to do, from a robust tenancy agreement, inventory reports, keeping a record of rent payments and doing check-in and check-out reports.

“Landlords and agents should remember that the deposit is always the tenant’s money, and if they wish to withhold any of it for cleaning or unpaid rent, then they must provide evidence of this.

“By following the checklist, landlords will ensure they have this evidence and aren’t losing any disputes unnecessarily.”

The guide ‘Preparing your dispute evidence – A checklist for landlords’ can be found

eBay-style auction site for rental properties

A new eBay-style rental property auction service allows landlords and letting agents to upload their properties so that potential tenants can bid on them.

ThePropertyBid.com has been launched by building surveyor Jonathan Ambrose, who said: “Our system will make the whole rental process completely transparent, so that prospective tenants can bid on a rental property in an open auction format that is managed by the landlord or letting agent.

“The site is all about making the process fairer, and while critics may suggest rental auctions will drive up rents in an already overheated market and be slanted towards landlords, the reality is that tenants will only bid what they can afford in their budget.

“What we’re doing is providing choice. With high demand for residential lettings, there will be resulting price increases anyway. It’s the market that determines the prices because ultimately rental prices are a reflection of supply and demand.

“It’s a matter of people determining what they can afford. If the asked rent moves beyond their expectations they will simply move on to another property that is within their budget. This won’t change, even if an auction system is in place.

“By having the rental process done online, everyone can monitor the process and make sure it’s done ethically. This way it’s all out in the open on the website.”

The site also ensures that applicants are reference checked before they are allowed to make a bid.

Letting agents and landlords create their own auction online, listing the property according to search categories such as type (ranging from parking bays and mansions), price and description.

There are no upfront or joining fees. Once the auction has finished, the landlord or agent is then required to pay a 20% commission fee on the achieved monthly rent amount and the tenant pays 5%, charged to cover their reference check and to ensure they are committed.

So, if for example, bidding for a property starts at Ł950 pcm by Tenant A and ends after Tenant B bids Ł1,000 pcm, the landlord or agent pays Ł200 and Tenant B pays Ł50, while Tenant A pays nothing.