Potential tenancy problems are often overlooked when would-be landlords dive into the buy-to-let market. I note that the growth in fraudulent sub-letting appears to coincide with the explosion of the multilet / rent to rent method of investing and just serves to highlight that investors need to make sure they get appropriate training in how this should be done before executing this strategy.
The private rental market in the South East has experienced significant growth over the last few years, mainly due to the lack of affordability for first time buyers to purchase suitable property. Some properties in the South East now cost over a staggering 20 times the average wage. Therefore it is no surprise that a large number of people find this simply unaffordable.
The high property prices also have an effect on the rental yields (how profitable the property is) and how much income the private landlord can generate (this is due to the high purchase and / or mortgage costs).
Whilst it is clear that letting agents and landlords from all areas of the UK experience issues with tenants from time to time, the South East does experience some issues more frequently than other areas of the UK.
The following are the most common causes of tenancy problems in order of relevance according to Evictions South East.
The main reason for evicting a tenant is for rent arrears – this is country-wide and unlikely to change. This is the reason for the vast majority of landlord / tenant disputes, and includes whether the rent is persistently late or whether the tenant has altogether stopped paying the rent.
This is a factor which seems to affect landlords in the South East more frequently than other parts of the UK. This is likely to be due to the overall lack of affordable rental accommodation. The subletting usually involves the original tenant (who signed the tenancy agreement with the landlord) to then pose as the landlord and advertise rooms to rent.
Some even go as far as to convert and partition rooms in order to increase the number of rooms available. It is not uncommon for a landlord to find a single room has been rented to an entire family.
This is where a tenant will knowingly provide false details in order to secure a tenancy. Most commonly the false details will be used to conceal their previous address history or previous landlord details (to avoid negative references) or they will provide fraudulent employment details. A new eviction ground has fairly recently been created to accommodate for this growing concern, however unfortunately it is not a mandatory ground.
Restrictions on housing benefit and the difficulties in securing direct payments has led to an increase in the number of housing benefit tenants being evicted either because they fail to pass on the housing benefit provided or because they are unable to meet any shortfall between the local housing allowance provided and the rental amount due. This is likely to be an issue across the UK, however landlords may experience more of these type of problems in the South East due to higher average rents.
There has also been a discussion on the Google + Letting Agents & Landlords group which highlights the type of tenancy problems landlords are reporting.
Neil Harrold from Evictions South East says:
“Being the South East’s largest eviction expert we do deal with a high volume of eviction cases, and whilst we can not discuss any individual cases, there is certainly a growing trend in both the number of evictions involving subletting and tenants who have provided false information at the start of the tenancy. Both of these have very serious implications for the landlord, either on their own, or combined with rent arrears - as the two tend to go hand in hand.”
Sue Ralston has been working in the property industry for over 10 years, she has a broad range of knowledge covering all aspects of lettings, landlord and tenant law, property sales and property law, and regularly produces reports from Evictions South East.