The Lemon Fool

A recent decision in the Central London County Court has been greeted with some surprise (though as it's HHJ Luba maybe it shouldn't have been!) and consternation by landlords, so I thought that any Fools who let their properties to multiple tenants (e.g. student lets) should be aware of it.

It concerned a very common scenario with this type of letting, where one tenant leaves and arranges informally for someone else to take their place. Usually, the incoming tenant pays the outgoing one their share of the deposit.

In very simplified terms the judge decided that every time this happened it created a new tenancy, and that the new tenancy was subject to the raft of rules and regulations that plague residential tenancies these days.

In particular, he decided that the rules relating to the protection of deposits applied, and that as the landlord had dealt with these arrangements informally, and had therefore not set up a fresh deposit protection on each change of tenant, they were in breach of the deposit regulations.

The net effect was that the landlord had to pay £1,200 to each of three tenants. As usual, of course, it wouldn't have just been the £3,600; the landlord would almost certainly have had to pay several times that sum in both their own and the tenants' legal fees.

And although it wasn't an issue in this case it's not just the deposit rules that one has to be careful of - it's all the other rules that apply to a new tenancy, such as supplying a gas safety certificate, a copy of the How to Rent book, checking immigration status etc. A failure to observe any of these requirements every time there's a change of tenant could result in a criminal record and/or an inability to regain possession of the property.

There's a good summary here - https://www.lexology.com/library/detail ... &utm_term=

For those who want to read the whole judgment it's here - https://www.bailii.org/ew/cases/Misc/2021/10.html

Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.
.

Lootman wrote:Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.
.

What new housing do landlords actually provide? Generally, none. If landlords were not around there would simply be more houses available to buy, that were built long before Mr or Mrs Landlord came along and thought "there's an easy way to make money". If you wish to question the government's inadequate provision of housing, simply ponder the consequences of letting council tenants buy their homes at knock-down prices. Research has claimed that fully 50% of all such homes have subsequently been sold again and are now owned by... landlords who let to tenants. Great for landlords, but no-one else.

Avantegarde wrote:

Lootman wrote:
Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing.

Quite why governments wish to deter the provision of housing is beyond me. Madness..

What new housing do landlords actually provide?

Generally, none.

Source - https://preview.zikoko.com/tag/hassen/

:O)

Cheers,

Itsallaguess

Avantegarde wrote:

Lootman wrote:Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.

What new housing do landlords actually provide? Generally, none. If landlords were not around there would simply be more houses available to buy, that were built long before Mr or Mrs Landlord came along and thought "there's an easy way to make money". If you wish to question the government's inadequate provision of housing, simply ponder the consequences of letting council tenants buy their homes at knock-down prices. Research has claimed that fully 50% of all such homes have subsequently been sold again and are now owned by... landlords who let to tenants. Great for landlords, but no-one else.

I do not recall saying anything about "new" housing. I was talking about the provision of existing housing.

Avantegarde wrote:What new housing do landlords actually provide?

If you want to expand the livable housing stock - and I do not want any more houses built, there are already far too many - then clamp down on second homes. A farmland-destroying rats nest of new-build little boxes a mile away apparently has significant second-home purchasers, because of its countryside, or former countryside location. There was of course much talk of 'affordable housing' when permission was given.

Landlords provide an essential service to those who will never get it together to buy their own place or need to move frequently or for that matter do not want the faff and upkeep of ownership.

V8

Avantegarde wrote:

Lootman wrote:Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.
.

What new housing do landlords actually provide? Generally, none. If landlords were not around there would simply be more houses available to buy,

Logic terminated before correct conclusion reached...

If landlords were not around there would simply be more houses available to buy, but there would be no-one to buy them, because the landlords are the ones with access to excess capital to invest in the houses. So if no-one could afford to buy those houses the price of all the housing stock would have to fall a bit to compensate for the smaller amount of aggregate capital allocated to housing. Then the housebuilders making a marginal profit at the old higher prices would now go bust having made a loss, and stop making houses. So actually the number of new houses WOULD reduce relative to the status quo and/or the value of people's houses would be lower.

Conclusion: landlords do support construction of new houses because they have good credit and/or capital position and can lease the houses to those who don't.

GS

88V8 wrote:Landlords provide an essential service to those who will never get it together to buy their own place

V8

maybe this is what you meant but I'd add "never earn enough to

1) build a deposit
2) get a mortgage. "

When you are on 19K a year you havent a prayer of buying anywhere.

didds

didds wrote:

88V8 wrote:Landlords provide an essential service to those who will never get it together to buy their own place

V8

maybe this is what you meant but I'd add "never earn enough to

1) build a deposit
2) get a mortgage. "

When you are on 19K a year you havent a prayer of buying anywhere.

didds

Would you mind if I politely corrected you please. Gleeson Homes sell new homes and their target customer is a bus driver earning £22K per year and his good lady wife who earns £18K per year. A joint income of £40K per year. Gleeson take great care to keep their prices within reach of those who would be better off buying a Gleeson Homes rather than renting. Noting that those figures may be a little out of date as that was 4 years ago. I believe the concept remains at the core of their business model. Gleeson Homes has grown well over the last decade and remains cash positive.

Of course you have to be a couple to afford the above.

AiY

GoSeigen wrote:

Avantegarde wrote:

Lootman wrote:Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.
.

What new housing do landlords actually provide? Generally, none. If landlords were not around there would simply be more houses available to buy,

Logic terminated before correct conclusion reached...

If landlords were not around there would simply be more houses available to buy, but there would be no-one to buy them, because the landlords are the ones with access to excess capital to invest in the houses. So if no-one could afford to buy those houses the price of all the housing stock would have to fall a bit to compensate for the smaller amount of aggregate capital allocated to housing. Then the housebuilders making a marginal profit at the old higher prices would now go bust having made a loss, and stop making houses. So actually the number of new houses WOULD reduce relative to the status quo and/or the value of people's houses would be lower.

Conclusion: landlords do support construction of new houses because they have good credit and/or capital position and can lease the houses to those who don't.

GS

Fatally flawed logic. Prices fall, maybe someone goes bust, others take up the slack. That's the market. There's a word for what happens if prices fall: consolidation. Look across the Atlantic to states where it was allowed to operate.

The converse: ever-escalating government money and government schemes push prices ever higher and people are priced out.

Either way, the price the market will bear feed through to the price of building land. In the short term builders may benefit from rises or suffer from falls, but only until the price of land has adjusted to the amount of money sloshing around. Government actions always[1] ratchet it upwards, benefiting landowners. But for housebuilding, each new government scheme is a short-term heroin rush, never sustainable.

[1] At least for values of "always" in my experience, which go back to my first professional job as a young graduate in 1983.

I've sold 8 rental properties, all 1 & 2 bedroom purpose built flats, in the last 6 years.
All priced for a quick sale through local estate agents.
Only 3 were bought by owner occupiers and 5 were bought by fellow landlords.
We can't force anyone to buy.......they get sold to the first people that want them.

didds wrote:

88V8 wrote:Landlords provide an essential service to those who will never get it together to buy their own place

maybe this is what you meant but I'd add "never earn enough to
1) build a deposit
2) get a mortgage. "
When you are on 19K a year you havent a prayer of buying anywhere.

We were only able to buy in 75 because the two of us in not particularly well-paid jobs but with a frugal nature, had saved the 10% deposit and a mortgage broker managed to find a lender who would advance a bit over the normal multiples.
Plus we were prepared to buy a fixer-upper and DIY it, which by implication those buying a new house are not.

What bothers me more about the housing market - and I agree that Govt schemes only ever push up prices - is that when rates rise, the marginal mortgagees are going to be scuppered.
We started on 15% (fifteen) interest and were thoroughly skint, but from there rates reduced.

So, when rates rise, cue more govt interference to 'help' those in negative equity.
Renters otoh, will be just fine.

V8

GoSeigen wrote:

Avantegarde wrote:

Lootman wrote:Before Thatcher you could only get a decent ROI from the provision of rental housing by being a Rachmann.

After Maggie deregulated the rental housing market us landlords had about two good decades and then the nanny state intervened and turned back the clock. OK, we still do not have sitting tenants and council "fair rent" officers. But the plethora of well-meaning but misguided laws have driven out the good landlords and, once again, to make decent scratch from being a landlord you have to be a barsteward.

A big part of why I sold off my housing units between 2003 and 2010. I saw which way the ill wind was blowing. Quite why governments wish to deter the provision of housing is beyond me. Madness.
.

What new housing do landlords actually provide? Generally, none. If landlords were not around there would simply be more houses available to buy,

Logic terminated before correct conclusion reached...

If landlords were not around there would simply be more houses available to buy, but there would be no-one to buy them, because the landlords are the ones with access to excess capital to invest in the houses. So if no-one could afford to buy those houses the price of all the housing stock would have to fall a bit to compensate for the smaller amount of aggregate capital allocated to housing. Then the housebuilders making a marginal profit at the old higher prices would now go bust having made a loss, and stop making houses. So actually the number of new houses WOULD reduce relative to the status quo and/or the value of people's houses would be lower.

Conclusion: landlords do support construction of new houses because they have good credit and/or capital position and can lease the houses to those who don't.

GS

At times landlords are essential for developments to get funded and built in the fist place, having say a 180 unit development with a build to rent operator committing at the front end to say 50 units, and paying stage payments (with a Stan Sec) throughout the build may make a the development cashflow that was unbankable then bankable, this is not uncommon with larger developments (in addition pre sales of affordable housing component of the development may act as a similar incentive to lend by de-risking the development)

Positive cashflows often only arise during the last 25%-30% of unit sales and larger developments can be quite long winded affairs. (We currently carry an overage in one with only 35 units that could well be 7 years from breaking ground to conclusion)

AsleepInYorkshire wrote:Would you mind if I politely corrected you please. Gleeson Homes sell new homes and their target customer is a bus driver earning £22K per year and his good lady wife who earns £18K per year.
Of course you have to be a couple to afford the above.

AiY

exactly.

So I as i said if you are on 19K a year you aint buying nuffink.

didds

richlist wrote:We can't force anyone to buy.......they get sold to the first people that want them.

and

have a deposit
can get a mortgage based on their salary.

didds wrote:

richlist wrote:We can't force anyone to buy.......they get sold to the first people that want them.

and
have a deposit
can get a mortgage based on their salary.

But one should not sell houses to them as can't afford. Hanging a millstone round their necks.
Many people never buy new cars.

In fact though, assuming a 4 x multiple, there are properties out there below £80,000. You and I might not want to live in them, but they are there, and indeed most people would not want the first house we bought, I assure you. They need effort.

I still think that beggarring oneself to buy is not the greatest idea when rental properties abound.

V8

88V8 wrote:

didds wrote:

richlist wrote:We can't force anyone to buy.......they get sold to the first people that want them.

and
have a deposit
can get a mortgage based on their salary.

But one should not sell houses to them as can't afford. Hanging a millstone round their necks.

???

The point being tyou can't sell a house to them. 'Cos they

1) haven't got the cash for an ourtright purchase
2) wont get a mortgage in the first place.

????????

An 80K house would require a depsite of circa 8-16K (AIUI)

on 19K a year at 4x salary they may get the mortgage needed... but will take them years to save their salary (pre tax) as a deposit

And that presuppsoes everybody in such a position can work where those 80K houses are.

We can be as cute as we like about "heres a bunch of houses built cheaply by Bloggs ltd, or in this town"... but that isnt the national reality.

Bottom line - when you earn 19K a year you arent buyiong anywhere. Except as suggested if you live in the right place. and have that 19K job whilst living there

didds wrote:

88V8 wrote:

didds wrote:and
have a deposit
can get a mortgage based on their salary.

But one should not sell houses to them as can't afford. Hanging a millstone round their necks.

The point being you can't sell a house to them. 'Cos they
1) haven't got the cash for an outright purchase
2) wont get a mortgage in the first place.
An 80K house would require a deposit of circa 8-16K (AIUI)
On 19K a year at 4x salary they may get the mortgage needed... but will take them years to save their salary (pre tax) as a deposit .
And that presupposes everybody in such a position can work where those 80K houses are.Bottom line - when you earn 19K a year you aren't buying anywhere. Except as suggested if you live in the right place. and have that 19K job whilst living there

The houses / flats I found on a very cursory search were in or near Manchester & Swansea.

Do agree that the deposit is an issue. Fortunately when we bought the wife-to-be had saved a lot of it.

But yes, for many on low salaries, landlords are essential and making life hard for them is not good policy.

V8

88V8 wrote: for many on low salaries, landlords are essential and making life hard for them is not good policy.

Of course, and for those who for whatever reason just prefer to rent e.g. they are mobile, they do not want the responsibility of ownership, and so on.

The very idea of declaring war on the providers of any valuable product or service is ridiculous. Would we try and legislate out of business farmers, pharma companies or utilities? All of them provide a vital service, as do landlords.

Moreover the theory that punishing landlords to try and compel them to sell up their units, thereby miraculously making homes affordable to all is just laughable. There are plenty of things one can do with a housing unit other than either rent to a long-term tenant or sell. I have done a few of them myself.

didds wrote:

AsleepInYorkshire wrote:Would you mind if I politely corrected you please. Gleeson Homes sell new homes and their target customer is a bus driver earning £22K per year and his good lady wife who earns £18K per year.
Of course you have to be a couple to afford the above.

AiY

exactly.

So I as i said if you are on 19K a year you aint buying nuffink.

didds

You may not be renting much in some areas either. In work poverty.