Various survey results indicate that most landlords continue to be positive about the prospects for their business in the years to come.

That is welcome, given that the last 12 months or so haven’t been particularly full of great news for the sector. Some had predicted that sentiment would turn negative as a result, but that hasn’t happened.

The backdrop

It has been a challenging past few years or so for landlords in terms of the news backdrop.

There doesn’t seem any point in going over the detail again but suffice it to say that a variety of things might have been expected to create some concern, including:

• stamp duty changes;
• tax relief changes;
• revised standards for landlord portfolios and lending accordingly;
• shorthold tenancy threats;
• and of course, Brexit and its potential negative impact on house prices and housing demand that some are speculating about.

Yet against that perhaps unwelcome catalogue of events, various sentiment surveys have indicated that the morale and optimism of landlords continue to confound the more gloomy forecasts arising as a result of the above.

In fact, one survey showed that 52% of landlords continue to feel confident and positive about their business prospects.

Drivers of optimism

The inevitable question that must arise is – what is driving such a positive feeling?

The fact is that, notwithstanding the above factors, the demand for affordable rental accommodation continues to rise and may continue to do so over the period ahead.

True, the picture may vary slightly depending upon region but on the whole, people are still looking at renting as opposed to buying properties in many cases. In any business, when a provider sees a high demand for their products or services, that is going to generate a positive outlook.

Transformation of the market

Although it is difficult to quantify, another factor having an influence here might be the increased professionalism of the landlord sector.

Over recent years, terms such as “accidental landlord”, “occasional landlord” and “dinner-party landlord”, have all expressed the recognition that many landlords were not necessarily seeing this as their major professional activity.

Some sources maintain the view that some of the above changes have discouraged amateur landlords from entering into the business and persuaded others of the same type already operating there, to seek opportunities elsewhere.

Almost inevitably, people operating in any line of business who are not experienced professionals may be more volatile to negative fear-based sentiments than those with a longer track record of survival in the industry. So the increasing numbers of experienced professional landlords vis-a-vis amateurs might also be a factor in maintaining an overall positive outlook.

Summary

It’s possible to argue that market sentiment doesn’t really count for much and all that matters are the facts and figures on the day.

However, when professionals in a business take an objective look at where things are going and adopt a positive and optimistic stance in terms of their own perceptions for the future, that must be encouraging.

Of course, crystal-ball gazing is always a dangerous game. However, based upon current landlord perceptions, the future of the industry appears to be promising.

The government has recently announced a range of new safety measures that are aimed at increasing the security of tenants in all sectors but notably that of the Private Rented Sector or “PRS”.

Background

For some years, various professional associations and political groups, as well as influential safety organisations, have been pushing for more specific legislation in certain areas, including that of electrical safety.

Although not necessarily specifically related to this particular piece of legislation, the entire domain has been given added emphasis and momentum by the terrible tragedy at the Grenfell Tower.

The new legislation will require all PRS landlords to undertake a formal electrical safety inspection every five years. This will be mandatory and not simply a matter of best practice advice and guidance.

Further consultation

This measure is perhaps best seen as being interim, in the sense that the government has also announced the formation of the committee constituted with the intention of taking steps to review the overall subject of fire safety and buildings.

That might even include a full review of building materials and appropriate flame and fire retardant installations, though the exact scope and of course, any conclusions, are yet to be made public.

Speculation always runs the risk of being wrong but it seems safe to predict that in the immediate future, PRS businesses will see increasing numbers of safety-related compliance requirements.

The backdrop of insurance

It’s perhaps worth commenting that whatever the conclusions of the committee are in due course, there may already be regulations in place for landlords governing fire safety.

In some places, such as in Scotland, Wales and Northern Ireland, these might exist at national devolved government level. In the case of England, with its typically more decentralised approach, those local authorities that operate formal landlord registration requirements may also have stipulations in place relating to minimum fire safety precautions and possibly fire safety inspections as well.

It is worth noting that a landlord insurance policy will typically require landlords to be in full conformity with all prevailing national and indeed local legislation, rules and regulations relating to all aspects of their business – including that of fire and electrical safety.

Failing to be in full compliance with such regulations may put your insurance cover at risk.

Discussion and summary

It seems likely as if the government’s new regulation and the subsequent consultative processes will be broadly welcomed by the industry.

No responsible landlord would wish to think they were letting out a property that did not meet best electrical safety standards. That would also apply to fire safety overall.

Of course, there may be some background concerns over more cost being added to business operations and perhaps yet more administration and bureaucracy too. That would be perfectly understandable but such things will be a relatively small price to pay given the importance of maintaining tenants’ safety.

The deliberations of the government’s committee’s and their full recommendations in due course will be eagerly anticipated and closely reviewed once they are available.

A report in the Express newspaper on the 26^th of January 2018 described the challenging economic and financial climate faced by private sector landlords and gave some detailed reasons why their numbers might be expected to decline.

Whether you are a “professional” landlord, making your buy to let property or properties the mainstay of your livelihood, or an “accidental” landlord who unexpectedly finds themselves with a property to let, you almost certainly need landlord insurance.

So, how do you find the most suitable product?

Consult a specialist landlord insurance broker

With our many years’ of expertise and experience, here at Cover4LetProperty, of course, we are bound to say that aren’t we, however …

• our essential mission is also echoed by the British Association of Insurance Brokers (BIBA), which says that the sole purpose of an independent insurance broker is to find appropriate cover for landlords at a competitive market price;
• of course, there may be other ways of trying to find suitable landlord insurance through your own efforts, but an independent let property insurance broker may be best placed to identify your specific needs as a landlord;
• it is the broker who is then able to match these to the wide range of products available – all the while searching for a price that typically represents good value for money;

Landlord insurance online

• not only do we do the searching and matching of your needs to insurance products on your behalf, but we have also streamlined our processes to make them as simple and straightforward as possible;
• not surprisingly, this involves enlisting the help of the internet, so that you may make all of your enquiries, receive a quotation, make your formal application and receive your policy documents entirely online (though if you wish to speak to us, of course we would love to hear from you);
• purchasing your landlord insurance online has probably never been so stress-free and seamless;
• throughout that process, we make sure to have your telephone number – so that we may contact you directly in the event of any questions or queries we may need to raise with you.

Securing suitable landlord insurance online

Once you have decided that obtaining your landlord insurance online may be the way to go, you might want to consider just what the cover is likely to embrace – please note that not all landlord insurance policies will offer all these elements of cover, so you do need to check with the individual provider:

• it typically covers protection against loss or damage to the let property of the building itself – from threats as varied as fire, floods, the escape of water, storm damage, impacts (from vehicles or falling objects, such as trees and their branches), vandalism and theft;
• it may also be extended to any contents you own in the let property if required – with some policies also including cover against the risk of malicious damage caused by your tenants;
• when you buy landlord insurance online, your policy also typically incorporates landlord liability cover – granting you indemnity against claims from tenants, their visitors, neighbours or members of the public who might have been injured or had their own property damaged through some contact with your let property; and
• your landlord insurance may also include compensation for any loss of rental income that follows a serious insured event which renders the accommodation temporarily unfit for habitation.

Finding and arranging your landlord insurance online, from a specialist provider with expertise and experience in matching your needs and requirements to the appropriate products available, therefore, may prove one of the most simple, straightforward and hassle-free methods of obtaining the cover you need.

Figures are beginning to emerge on the financial cost to landlords and letting agents of the government’s intention to ban letting agents’ fees to tenants (so-called tenant fees), according to a report published by the Residential Landlord’s Association (RLA) on the 2nd of April 2018.

The government’s plans to ban letting agents’ fees being charged to tenants were announced in a draft Bill to Parliament last November and the RLA’s report refers to the impact assessment prepared for the Housing, Communities and Local Government Select Committee (HCLGSC).

The ban on tenant fees is expected to cost landlords a total of £82.9million in its first year of implementation, says the assessment, whilst letting agents themselves face a bill of £157.1 million.

If you are a landlord, of course, your immediate response to no longer being able to charge your tenant directly for the fees you may need to pay a letting agent is to recover the cost some other way. The government has anticipated this response by introducing a specific ban on landlords increasing the first month’s rent paid by the tenant to cover the cost of the letting fees.

Pressure groups have – not unnaturally – forecast a general increase in rents, therefore, as landlords strive to recover the costs of such fees.

The proposed penalties for breaching the new regulations on tenant fees is a fine of up to £5,000 in the first instance, rising to a maximum of £30,000 if it is a second offence within five years, or potential proceedings in the criminal courts.

Tenants’ deposits

Included in the measures proposed in November of 2017 was a cap on the amounts of deposit a landlord may charge his tenant – a holding deposit to be limited to no more than the equivalent of one week’s rent and a security deposit (against breakages and damage) of no more than six week’s rent.

In its impact assessment of the proposed measures, the government has confirmed these caps – but stresses that they are upper limits and that, in many instances, the landlord may decide that a smaller deposit may suffice.

For the first time, however, the government has accepted a recommendation that holding deposits may also be charged by letting agents.

In its response to the HCLGSC, the government has promised to provide “guidance” to landlords on what it considers to be an appropriate level of deposit in either case. It has also suggested that the landlord’s only reason for retaining a security deposit is as the result of some breach by the tenant of the tenancy agreement.

According to a report in the Guardian newspaper on the 6^th of January 2018, the ban on tenant fees and caps on tenants’ deposits are unlikely to come into force until “after spring of 2019”.

Tenancy Deposit Protection scheme

The regulations on tenant fees currently under consideration suggest no change in the present Tenancy Deposit Protection scheme, which came into full force on the 23^rd of June 2015, and which require any landlord to place a deposit received from a tenant in an approved, independent account for safekeeping until its return.

Failure to place the deposit in an approved scheme may attract an unlimited fine, up to three times the value of the deposit taken, but typically in the sum of £3,600.

Please note: This should not be construed as advice and is based on our current understanding of the legislation.

“Generation rent” is a term coined by the media to describe that large segment of the – mainly younger – population who are renting rather than buying their own home. The Independent newspaper, for example, has a whole section devoted to the group.

The underlying assumption in practically every reference to generation rent, however, is that the individuals concerned would much rather own their home than rent from a private landlord – if only they had the financial resources to do so.

Generations choosing to rent

Our own recent research, however, suggests that a significant proportion of the population – 16% of them in fact – want to rent instead of buying and choose to do so because they:

• made a conscious decision not to be tied down with a mortgage – the reason given by 4% of the sample;
• want to be free of the responsibility of having to pay for property maintenance and repair costs – 5% of the sample; and
• welcome the financial and physical freedom – to up and move at a moment’s notice, for example – that renting gives them (7% of the sample).

What is more, the decision to rent rather than buy appears to be taken by as many older householders as young ones – generation rent is not the preserve of youngsters:

• in the age group of 45 to 54 year-olds, for example, 24% of those surveyed said they chose to rent – compared to just 3% of those aged 25 to 34;
• in the 55 to 64 age group, 12% of respondents gave their reason as not wanting to be tied down by a mortgage – suggesting that they wanted the option of choosing to move to live elsewhere without the hassle and inconvenience of having to sell a home to do so; whilst
• both of these age groups mentioned “financial freedom” as their principal reason for choosing to rent rather than buy.

Further savings through renting

The cost of buying your own home is clearly a major factor in people’s decision to rent. A story in the Mirror newspaper on the 8^th of December 2017, for example, suggested that the average monthly cost of renting in 49 out of 50 of Britain’s largest cities is cheaper than the average monthly mortgage repayment.

But income is unlikely to tell the complete story since 88% of those we recently surveyed who choose to rent because they say they cannot afford to buy are in fact earning more than £40,000 a year.

And it is not only a relatively low income that prevents some people from choosing not to buy. 11% of recently surveyed renters, for instance, said that freedom from the costs of maintaining and repairing a home was a significant factor.

They might also have added freedom from the cost of arranging building insurance if they rent their home. Building insurance, of course, is typically the responsibility of the owner of the buy to let property and is incorporated into most landlord insurance policies. Tenants, on the other hand, only need to safeguard their possessions and belongings with contents insurance.

Facebook’s CEO Mark Zuckerberg gave 10 hours of testimony before the US Senate on the 10^th and 11^th of April 2018 – most of it connected with recent scandals surrounding the website’s disclosure of personal data about its members.

For viewers this side of the Atlantic, the occasion may have helped reinforce the importance of sweeping new EU regulations (including the UK) on the protection of personal data – called General Data Protection Regulation (GDPR).

If you are a landlord, you might not yet have realised just how much GDPR is also likely to affect you.

GDPR in a nutshell

• the regulations come into effect on the 25^th of May 2018;
• any “data subject” is then entitled to be given information about how their personal data is used and stored – including the time limits within which the information must be provided;
• you may rely on consent given by the subject for holding their data, but there are strict controls about how you obtain that consent;
• records must be kept about how you handle personal data, together with any decisions you make on the subject;
• stricter requirements govern the security of the data you store and the time limits for which it may be kept;
• if you commit a breach of the regulations, you must notify the Information Commissioner’s Office (ICO) and, in some cases, the data subject him or herself.

The landlord’s GDPR obligations

As a landlord, in one way or another you handle information or personal data about your tenants. As guidance prepared by the Residential Landlords Association (RLA) and published on the 3^rd of April 2018 points out, therefore, you are subject to all of the data protection requirements of GDPR – and need to comply with these in time for the enforcement date on the 25^th of May.

As the landlord, it is imperative that you handle all of the personal data you need to keep about your tenants in compliance with the GDPR and recognise that the new rules give them considerably greater control over their access to information about the data you hold and what happens to it.

“Gateways”

GDPR not only imposes much stricter controls on the way you keep and use personal data about your tenants but also introduces the concept of legal “gateways” which give you the rights to collect any information in the first place.

Probably the most commonly use gateway will be your reliance on the consent that has been given by your tenants to collect and use certain data for a specific purpose or purposes.

But express consent is not the only legal justification on which you may rely. Both the need and consent may be implied or expressed in the form of contract that exists between landlord and tenant. There may also be a legitimate interest for both you and your tenant in handling data concerning things such as annual gas safety checks and arrangements that are in place to safeguard tenants’ deposits.

All in all, therefore, the introduction of GDPR involves new concepts and a considerably tighter regime for the protection of any kind of personal data. The regulations are quite complicated, but as a landlord, you have strict new rules with which to comply – so, make sure you are ready for them on the 25^th of May.

It’s almost here.

The “it” above is the change to HMO (House in Multiple Occupation) legislation that will take effect from the 4^th May 2018.

Just in case you’ve missed it, here is a quick summary of what’s happening and some of the potential implications for you in terms of HMO insurance.

The background

Back in 2016, it became clear that the government was going to press ahead with regulatory changes covering HMO properties.

Some of the key components coming out of these revisions include:

• the legislation will now define a minimum living space for tenants in HMO properties;
• virtually all HMO properties will now need to be formally registered and licensed accordingly;
• flats above shops or any other form of commercial premises will now need to be included in HMO licensing requirements;
• landlords will be obliged to provide facilities for the appropriate disposal of rubbish and related storage;
• any reference to “storeys” is being removed from the definition of HMO. This is a hugely important change and it should not be ignored as merely playing with words. Lots of properties, previously excluded from the definition of HMO, will now be picked up by this change.

As a result of these changes, some sources estimate that approximately 160,000 properties currently NOT classified as HMOs will now be re-designated as such.

The implications

For landlords who are already operating an HMO property or those whose properties are about to be included in this definition as a result of the above changes, there are three points to keep in mind:

• you must now register and licence your business with the appropriate local authorities (variations may exist for landlords in Wales, Scotland and Northern Ireland);
• it is imperative that you can also demonstrate your compliance with the new requirements for such properties;
• you must also review your HMO insurance.

Do please remember that the fines for non-compliance with the revised legislation are unlimited. It is also worth putting this in the context of an increasing political backdrop of attempting to more rigorously impose structures and enforce legislation within the letting sector. Ignoring these changes might be unwise.

Insurance issues

If you are currently operating with a standard landlord insurance policy and find that your property is now about to be re-designated as an HMO, your existing policy may no longer be appropriate.

Typically insurance providers see standard landlord insurance policies and HMO insurance as being two very different things. As you may appreciate, the risk profile of a property with multiple lettings within it is significantly different to say a single-occupant flat.

In some registration formalities, it seems likely as if you might need to demonstrate to the licensing authorities that you are appropriately insured. Equally, from the viewpoint of an HMO insurance provider, you may need to be able to prove that you are fully and appropriately registered.

The two things, licensing and HMO insurance, are inexorably intertwined and it would be risky to consider them as two separate things in terms of your obligations as a landlord.

As the deadline approaches, if you haven’t taken action in this area, then it really is time to do so.

Have you put the date in your diary yet? The 1^st of April 2018 is now less than four months away – which leaves little time for landlords to be fully prepared for the implementation of Minimum Energy Efficient Standards (MEES) in let property.

What’s it all about?

As the pressure group for corporate social responsibility 3BL points out, the government’s intention to impose minimum standards of energy efficiency in let property has been under consideration for more than five years.

Regulations giving effect to new Minimum Energy Efficient Standards (MEES) were eventually passed by Parliament on the 26^th of March 2015 – with the intention of providing landlords sufficient notice for making any anticipated improvements to their let properties in time for the commencement date of the 1^st of April 2018.

As we pointed out here at Cover4LetProperty back in May 2017, however, the advance warnings seemed to have little effect on many landlords. We cited research to suggest that, at that time, one in four owners of let property had no idea at all about MEES and two in every three remained hazy about just what the new regulations meant and how they might affect their buy to let businesses.

Yet MEES – like every other legal obligation imposed on landlords – has a serious purpose and strict penalties for non-compliance, with possible implications for your let property insurance if you knowingly breach the rules.

MEES rules

The basis for MEES standards is the Energy Performance Certificate (EPC), which confers an energy efficiency rating on any home according to a scale from A (the most energy efficient) to G (the least). An EPC is already necessary for anyone wanting to sell their home or any landlord intending to let one (a copy of the certificate must be made available to your tenants when they move in).

The MEES regulations which come into effect on the 1^st of April 2018 now make it illegal for you to let your property unless its energy efficiency meets certain minimum standards. Your accommodation must be rated at least an E, and it is prohibited to let or offer for rent property with an EPC of F or G.

Strict penalties are incorporated in the regulations. If your property does not comply with the new minimum energy performance standards, you may face fines of up to 20% of its rateable value if you have failed to take the necessary remedial action within three months.

Impact

The majority of properties offered for rent are already likely to meet the new Minimum Energy Efficient Standards. For those that do not, landlords may hardly complain that they have not had enough time to make the alterations and improvements necessary to upgrade the energy efficiency of their property.

Nevertheless, buy to let businesses have been under increasing pressure recently from a host of rules and regulations designed to encourage the overall upgrading of private rented accommodation. MEES may be a further source of financial pressure as far as some landlords are concerned.

Landlords of buy to let property have been under increasing financial pressure in recent years.

Probably the biggest challenge to running a profitable business has been the effective increase in taxation, following the decision to abandon tax relief on mortgage interest repayments paid by landlords.

But other regulations, such as an increase in Stamp Duty, changes to the tax allowance on expenses for wear and tear, and a general tightening up by the Bank of England’s Prudential Regulation Authority on the lending criteria for buy to let mortgages have all weighed heavily on the ability of buy to let landlords to run a profitable business.

Licensing of let property by local councils is also becoming more widespread and adding further administrative burdens on even reputable and responsible landlords.

The additional costs – together with the normal overheads of maintenance, letting agency fees and let property insurance – are likely to have left landlords with little choice but to increase rents.

The most recent spur to such increases may be the announced intention by government opposition leader, Jeremy Corbyn, at the Labour Party conference to reintroduce some form of rent controls in the private sector. Despite conflicting view on whether rent controls are ultimately to the benefit of tenants, and others who support the concept, many landlords may be encouraged to increase rents now, in anticipation of any controls in the future.

Our landlords’ insurance survey

A rise in the number of private sector landlords already looking to increase rents is a trend confirmed by a survey recently commissioned by ourselves here at Cover4LetProperty.

Our press release of the 21^st of August 2017 reveals that almost a third of all buy to let landlords we canvassed are planning to increase rents within the next 12 months or so.

The reasons appear to be all about the environment in which landlords now have to operate rather than anything to do with the tenants themselves. The overwhelming majority of landlords (92.55%) said they were happy with the tenants they had, whilst only 1% said they were unhappy, and 6% responded that they felt “50/50”.

Although they gave no indication of the scale of increases likely to be made, the overwhelming reason given by landlords for the need to increase rents was the additional tax burden imposed by government. Other concerns included uncertainties over Brexit, the burden of increased regulations and “interference from the local council”. The prospect of some form of government rent control, of course, may well prove the final straw.

All in all, therefore, it may come as absolutely no surprise that one respondent we asked commented that the role of a landlord had become “more complicated now than when I started”.

Buy to let portfolios

Given the uncertainties in the overall buy to let market, it may also be little surprise that relatively few landlords reported any intention of increasing the size of their buy to let portfolio in the coming year.

A significant 83% said they had no such intention, with only 14% expressing any plans to increase their buy to let property holdings.

If you have teenagers yourself, you probably know that students tend to be in a class of their own – and, as tenants, this typically puts them in a special category as far as the landlord, in terms of his particular obligations and the specialist landlords insurance for students that is needed.

Student landlord insurance cover

It is impossible to generalise, of course, but those in further education are likely to:

• be younger than the average tenant – although there are plenty of mature scholars too;
• work less regular hours than tenants who are in full-time employment;
• probably have a smaller disposable income and maybe managing only on a grant – although there may also be significant numbers of well-heeled international students;
• have a scanty, if any, credit history for you to check – and may be in the early stages of learning how to manage their financial affairs;
• be more inclined to hold impromptu parties and have more visitors than other classes of tenant; and
• raise the risk of a greater number of breakages, theft, damage and general wear and tear in your let property.

That may be why some buy to let insurance policies contain provisions specifically excluding rental to those in further education (and other groups, such as benefits claimants or asylum seekers).

It is also why we make it one of our specialities here at Cover4LetProperty to arrange landlord insurance which covers all categories of tenant – including those in further education – so that your buy to let business has every opportunity of tapping into this potentially buoyant and rewarding sector of the market while giving you peace of mind that your investment is adequately insured.

Student lets – the market

The student let market is growing, with both UK national and international students signing up for university attributed to a 17% increase in the number of student lets.

So, an attractive market exists, but only if you are fully aware of the additional obligations you may have as the landlord of accommodation let to those in further education – obligations with which it is necessary to comply as a matter of law and in order to maintain the validity of your landlords insurance for students.

Student lets – your obligations

As the landlord of any let property, the principal obligations set out in a variety of laws, relates to the safety of the accommodation and keeping it free from any health hazards. For example:

• you must arrange an annual inspection, by a qualified Gas Safe engineer, of any gas installation, its flues and appliances;
• a copy of the safety certificate that is issued must be given to new tenants when they move in or to existing tenants within 28 days of you receiving the certificate;
• the electrical installation – its cables, sockets and fittings – together with any of the appliances you provide, must also be kept in safe working order and, although the law does not specify an inspection schedule, the prudent landlord is likely to carry one out at least once every five years or when there is a change of tenancy;
• as a landlord you must comply with all national and local fire regulations and fit a smoke alarm on every floor of the property and a carbon monoxide detector in any room where there is a coal or wood-burning fire;
• you must be able to prove that any tenant and members of their household have an immigration status giving them the right to rent the property and stay in the UK;
• any deposit you accept from tenants as a condition of an assured shorthold tenancy (the most common type), must be held by an independent third party, approved under the government’s Deposit Protection scheme;
• Houses in Multiple Occupation (HMOs) – where three or more tenants live in the property as more than one household, sharing facilities such as bathroom and toilet or kitchen – are especially popular with students, but impose further obligations and health and safety checks on the part of the landlord;
• the property must not be overcrowded, for example, and there must be sufficient facilities for the number of tenants sharing the accommodation;
• many HMOs and all large HMOs (those with at least five tenants forming more than one separate household, but all sharing kitchen or bathrooms) must be licensed for use by your local authority;
• the licence is granted on condition not only that the property offers a suitable standard of accommodation, but also that the landlord is a “fit and proper” person.

In order to make the most of the financial rewards that may be enjoyed from letting to the large student population in the UK, therefore, you must ensure that you meet a range of obligations as their landlord – and make sure your landlords insurance covers students too. (Which it does with our policies!)

Why not get a landlord insurance quote today?