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The ultimate buy-to-let practical guide: how to manage tenants and estate agents

Follow these tips on how to navigate the welfare system and what you need to know about the new eviction processes

By Melissa Lawford 16 November 2020 • 6:00am

Do you want to invest in buy-to-let but don't know where to start? In this weekly four-part series, we break it down, looking at the money you need to spend, how to strategise your investment, how to manage agents and tenants, and how to maintain a property

The pandemic has put landlords under huge financial pressure, as unemployment rises and tenants struggle to meet their monthly rental payments. In the third instalment of our four-part series, we look at how landlords can best manage the growing complications arising from coronavirus.

Are letting agents worth the fees?

Paying for full property management services is cost efficient, said Spencer Fortag, of Dockside Property Services estate agents. “Agents tend to charge 10pc of rental income for let only, but 15pc of rental income for full management.” The charges are tax deductible.

Using an agent is also advisable for anyone who does not want to be called out of hours, and who wants reassurance that the necessary health and safety checks are in place, said Theresa Wallace, of the Lettings Industry Council, a trade body.

Landlords should opt for agents who are part of professional bodies, Ms Wallace added.

Those that are part of Propertymark, for example, will have taken out client money protection insurance, which means that even if the company goes bust, your deposit money will be protected. Landlords should also take out rent guarantee insurance to cover void periods or lost rent, said Ms Wallace. These fees are also tax deductible.

“If you live close by and have spare time then there is an argument for self-managing the property,” said Mr Fortag. But the input is considerable, and you will need to follow changes in regulation closely.

How to get the best tenants

“If you get a bad tenant it will take six to eight months to remove them, so getting good tenants is absolutely paramount,” said Mr Fortag.

Easy wins to help make your property appealing include adopting neutral colour schemes, repainting doors and installing good broadband, he added.

The rise of working from home means tenant demand has shifted in the wake of the pandemic. Few are still prepared to pay for city centre rentals that are close to their offices, and more want larger properties with outdoor space that are in rural locations.

Investing in parts of the country where local employment has been less affected by the pandemic, such as along the Cumbrian coast, where jobs are concentrated in the energy sector, will also mean your rental income is more likely to be stable.

Landlords should note that a series of recent landmark court rulings mean that it is now considered unlawful to discriminate against taking on tenants who receive housing benefits.

If tenants do fall into arrears, communication is crucial, Mr Fortag added. Get in touch as soon as payments are late to check if the tenants need support.

How much has coronavirus changed the eviction system?

In March, the Government introduced an eviction ban that was extended three times, until September. In August, it introduced a six month notice period for eviction.

Cases where tenants are in extreme rent arrears or are involved in anti-social behaviour are prioritised. Landlords who issued Section 8 notices on or after August 29 have to give six months notice if the arrears are less than six months. If they are more than six months, however, the notice period is only four weeks.

The courts are dealing with a major backlog after the eviction ban. Paul Shamplina, of Landlord Action, an eviction service, said: “The reality now is that with the six month notice period, and then a six to eight month wait to get to court, the tenant could be 12 to 14 months in arrears before eviction.”

In addition to lost rent, evictions typically cost landlords between £800 and £2,500 in legal fees, said Mr Fortag. He advised taking out rent guarantee insurance, which typically costs between £300 and £400 per year. This covers both lost rent and legal expenses.

Prospective landlords should also note that the Conservative Party made an election promise to abolish Section 21, so-called “no-fault” evictions, which are the most commonly used way of evicting tenants.

How to manage the welfare system

Tenants without a job can apply for Universal Credit to cover their housing costs, though this contribution is capped at the Local Housing Allowance.

In April, the Government increased LHA to cover at least 30pc of local market rates. If this is not sufficient to cover total rent costs, tenants can apply for Discretionary Housing Payments to make up the difference (though this support is not guaranteed).

Sherrelle Collman, of Caridon Landlord Solutions advisers, said that landlords with tenants on Universal Credit should apply for an Alternative Payment Agreement.

Normally, Universal Credit is paid in a monthly lump sum direct to the recipient. Landlords can face problems receiving the money if the tenant has direct debits or other outstanding debts that they choose to prioritise. APA means that the housing costs allocation can be paid direct to the landlord.

Be wary, however, that there are currently delays getting this set up due to the volume of requests, said Ms Collman.

The benefits assessment period can also cause problems. When a claimant applies for Universal Credit, there is a month long wait, and they will typically receive their first payment seven days after the assessment period ends.

The wait time means a tenant “is always going to be in arrears,” said Ms Collman. Tenants are eligible to apply for advance or hardship payments to cover any gaps, but this has to be repaid via reductions to Universal Credit payments.