L3 Leasing & Letting

Question 1

What checks did the new tenant have to undergo? (SS complex letting matter)

Answer 1

Typically undertaken by the agent

Reference checks, including affordability (salary), right to rent (reside in the UK), any CCJs

Passport / ID check

Question 2

Is the tenant allowed to add a new tenant onto an AST? (SS complex letting matter)

Answer 2

Yes, but this constitutes an entirely new AST

Joint and several liability

Question 3

What terms would change in the AST? (SS complex letting matter)

Answer 3

The names on the AST

New term

New rent

New deposit amount

New address

Possible new guarantor for new tenant?

Question 4

What steps would they take to forfeit their lease and what are the implications? (SS complex letting matter)

Answer 4

Step 1: Obtain A Written Request
Step 2: Check The Property’s Occupancy Limit
Step 3: Acquire A Completed Rental Application
Step 4: Make A Decision
Step 5: Review The Details With The Tenants

Question 5

What is the maximum deposit amount you can request? (SS complex letting matter)

Answer 5

5 weeks’ rent

Unless rent >£50k per annum then 6 weeks’ rent

Question 6

How did you hold and protect deposit monies? (SS complex letting matter)

Answer 6

Protected with MyDeposits (government scheme) WITHIN 30 DAYS

We request the lead tenant’s forwarding address and details

Register with MyDeposits - around £27 to protect and unprotect

Ask tenants to sign certificate and send them a countersigned copy for their records

Question 7

What were the key objectives of the TFA? (SS complex letting matter)

Answer 7

The Act limits the amount a tenant can be charged for a holding deposit and security deposit and defines what a tenant can be charged in addition to rent.

Changes made by the legislation:

Holding deposits = capped at one week’s rent;

Security deposits = capped at five weeks’ rent / £50,000 rent at six weeks’ rent

Default fees (fees which can be charged during the tenancy) are limited to the reasonable costs incurred in replacing a key or lost security device or interest on rent overdue by 14 days or more, capped at 3% above the Bank of England base rate

Capped at £50 fee

Question 8

What are the costs a LL can charge? (SS complex letting matter)

Answer 8

Default fees (fees which can be charged during the tenancy) are limited to:

reasonable costs incurred in replacing a key or lost security device

interest on rent overdue by 14 days or more, capped at 3% above the Bank of England base rate

Capped at £50 fee

Question 9

What are the fees to do this? Was it just £50 in the end? (SS complex letting matter)

Answer 9

Yes plus payment for their deposit uplift

Question 10

What are the advantages and disadvantages of offering EACH OF THESE service? Why would it effect leasing? (AP services)

Answer 10

pet-friendly facilities
- pet rent, increased wear and tear, but access to more tenants (lock down trends)

events programme
- ESG criteria, higher opex, but potentially higher retention and satisfaction rates

zero deposit options
- can provide LL with greater protection, quicker payments, fewer voids. Flatfair offers LL 20% revenue share on 1 weeks’ rent

Question 11

Which ones improved and which ones were disadvantageous? (AP services)

Answer 11

Short lets NOT GOOD

Zero deposit GOOD

Question 12

This is interesting and I would probably ask you on what other variables proved to improve/damage the churn rate, and if so by how much? (AP services)

Answer 12

Improve churn (retention)

• might have lower churn for 3-beds anyway (in case of families)
• dependent on customer satisfaction
• pet friendly

Damaged churn (leaving)

• student demographic so might move around more
• not engendering a sense of community

Question 13

What were your recommendations? (AP services)

Answer 13

Wine vending machines (£3 / glass) - positive NOI @ £3 / glass

Zero deposit options (20% revenue share)

Furnishing units

5-star concierge service

Question 14

What was the structure of this report? (AP services)

Answer 14

Each service with pros and cons

Potential CAPEX cost

Potential OPEX cost

NOI cost (-ve or +ve)

Question 15

How can zero deposit options help to reduce voids? (AP services)

Answer 15

Greater protection, quicker payments, fewer voids. Flatfair offers LL 20% revenue share on 1 weeks’ rent

If there’s any damages or unpaid rent, you’re put back in pocket within 10 days of charges being agreed.

Properties let faster and attract more quality tenants.

When it’s time to move out, all of the regular end of tenancy checks still take place. Tenants receive a check-out bill if there are damages or unpaid rent

Independent adjudicators if disputes

Question 16

What is a short let? What are the requirements? (AP services)

Answer 16

short lets can range from a few nights up to many months, with a rough cut off at six months

short lets tend to be priced around 50% to 75% more than the equivalent long let property

there is legislation in place: cannot rent properties on a short-term HOLIDAY LET basis for more than 3 months / year OR need to apply for Material Change of Use from your local authority = SUI GENERIS USE

Question 17

Would there not be higher turnaround and churn costs? (AP services)

Answer 17

YES!! Expected that unit is fully kitted out with accessories

Check in / check out

Inventory

More administration costs

Question 18

How much more rent can you get with short lets? What are the advantages and disadvantages? (AP services)

Answer 18

50% to 75% more than the equivalent long let property

Question 19

SCENARIO: Agent/landlord agrees to early termination on the condition that replacement tenants are found. What fees can be charged?

Answer 19

Claim against deposit can be made at end of tenancy.
If disputed, can be referred to TDS or Court.

2019 Act makes it clear that costs charged for early termination must not exceed:

the LOSS incurred by the landlord (usually the loss in rent resulting from a tenant’s decision to leave and/or the costs of re-advertising or referencing)

or the reasonable costs to the agent (such as referencing and marketing costs).

you can ask them to pay rent as required under their tenancy agreement until a suitable replacement tenant is found

Question 20

What AST would you use for a short let?

Answer 20

A holiday letting agreement = a licence to occupy, but dont have protection of AST (TYPICALLY USE THIS FOR LETTINGS UP TO 90 DAYS SAY)

90+ days is better to use AST

many assume the minimum length of AST has to be 6 months BUT there is no minimum period for an AST. Until February 1997 the minimum was 6 months, however this requirement was removed by the Housing Act 1996.

Your problem is that if your tenant decides not to leave at the end of the fixed term tenancy (for say 3 MONTHS) then you will have to go through the legal process to remove them. You CAN NOT serve a S21 before the 6 month anniversary.

Question 21

When should an AST NOT be used?

Answer 21

it began or was agreed before 15 January 1989

the rent is more than £100,000 a year

the rent is less than £250 a year (less than £1,000 in London)

it’s a business tenancy or tenancy of licensed premises

it’s a holiday let

the landlord is a local council

Question 22

What type of tenant might opt for short lets?

Answer 22

Corporate rentals: Some companies will look to put their staff into temporary accommodation if they are working away from home for a short, definite term

Professionals: An individual or couple may decide to find themselves temporary accommodation while they are working away from home.

Tourists

Prospective homeowners researching an area

Homeowners in need of temporary alternative accommodation

Question 23

What is a holiday let?

Answer 23

Unless planning permission is obtained, Londoners are restricted to renting their property short term for a maximum of 90 consecutive nights in a calendar year.

Airbnb and unit let less than 90 nights

Question 24

What is the minimum period for an AST and what are the potential risks?

Answer 24

many assume the minimum length of AST has to be 6 months BUT there is no minimum period for an AST.

Until February 1997 the minimum was 6 months, however this requirement was removed by the Housing Act 1996

downside = anything <6 months, LL can’t use a S21 to obtain accelerated possession until after 6 months of the tenancy has elapsed.

Question 25

What was the new rent (SS)?

Answer 25

Old rent = 1-bed = £1,800

New rent = 2-bed = £2,500 (£30,000pa)

Question 26

What was your advise to landlord about terminating the tenancy on the existing unit? Was there a break clause, what was the notice period etc.? (SS)

Answer 26

Both parties have to agree to forfeit the lease and NEGOTIATE A SURRENDER

Should have agreement in writing

If no agreement - tenant remains liable to pay rent and bills