Monday, 28 November 2016

Sunderland Landlords and Tenants - What Does The Tenant Fee Ban Mean For You?

With our new Chancellor of the Exchequer revealing a ban on Tenant fees in his first Autumn Statement last Wednesday what does this actually mean for Sunderland Tenants and Sunderland Landlords?

  • Tenant Fees set to banned within 12 to 18 months
  • Rents due to rise as those fees passed to Landlords
  • Landlords won’t be worse off – and neither will Tenants or agents

The private rental sector in Sunderland forms an important part of the Sunderland housing market and the engagement from the chancellor in Wednesday’s Autumn Statement is a welcome sign that it is recognised as such 

I have long supported the regulation of lettings agents which will ensconce and cement best practice across the rental industry and,  I believe that measures to improve the situation of Tenants should be introduced in a way that supports the growing professionalism of the sector

Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood

Great News for Sunderland Tenants

So, let’s look at Tenants...this is great news for them, isn’t it?  Well before you all crack open the Prosecco, read this...

Although I can see prohibiting letting agent fees being welcomed by Sunderland Tenants, at least in the short term, they won’t realise that it will rebound back on them

First up, it will take between 12 and 18 months to ban fees, as consultation needs to take place, then it will take an Act of Parliament to implement the change

A prohibition on agent fees may preclude Tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by Landlords, which in turn will be passed on to Tenants through higher rents

Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances), it said on Wednesday...

“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”

Shelter and Scotland

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that, 

“renters, Landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, Landlords and renters, and the sector remains healthy.”

Going on, 

“Many industry insiders had predicted that abolishing fees would impact on rents for Tenants, but our research show that this hasn’t been the case. The evidence showed that Landlords in Scotland were no more likely to have increased rents since 2012 than Landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

.. yet the devil is in the detail….

Only yesterday Shelter were quoting this Research from December 2013 to say rents never went up following the Tenant fee ban in Q4 2012. I have read that research and I agree with that research, but it was published three years ago, only 12 months after the ban was put into place 

I find it strange they don’t seem to mention what has happened to rents in Scotland in  2014, 2015 and 2016 .. because that tells us a completely different story!

What really happened in Scotland to rents?

I have carried out my research up to the end of Q3 2016 and  this is the evidence I have found...

In Scotland, rents have risen, according the CityLets Index by 15.3% between Q4 2012 and today

CityLets are the equivalent of Rightmove North of the Border – so they know their stuff and have plenty of comparable evidence to back up their numbers 

When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents 

North East 2.17% increase
North West 2.43% increase
Yorkshire and The Humber 3.21% increase
East Midlands 5.92% increase
West Midlands 5.52% increase
East of England 7.07% increase
South West 5.82% increase
South East 8.26% increase

London 10.55% increase

….and let me remind you about Scotland … 15.3% increase. 

Are you really telling me the Scottish economy has outstripped London’s over the last 4 years??? 

Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years they are now the Powerhouse of the UK? 

If they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate Independence!!

So what will happen in the Sunderland Rental Market in the Short term?

Well nothing will happen in the next 12 to 18’s business as usual!

… and the long term?

Rents will increase as the fees Tenants have previously paid will be passed onto Landlords in the coming few years. Not immediately...but they will

As a responsible letting agent, I have a business to run

It takes, according to ARLA, (Association of Residential Letting Agents) on average 17 hours work by a letting agent to get a Tenant into a property. We need to complete a whole host of checks prescribed by the Government; including a right to rent check, Anti Money Laundering checks, Legionella Risk Assessments, Gas Safety checks, Affordability Checks, Credit Checks, Smoke Alarm checks, Construction (Design & Management) Regulations 2007 checks, compliance with the Landlord and Tenant Act, registering the deposit so the Tenants deposit is safe and carry out references to ensure the Tenant has been a good Tenant in previous rented properties.

All of which the vast majority of lettings agents take very seriously and are expected to know inside out making us the experts in our field. Yes, there are some awful agents who ruin the reputation for others, but isn't that the case in most professions?

...but business is business

No Landlord, no Tenant and certainly no Letting Agent does work for free

I, along with every other Sunderland Letting Agent will have to consider passing some of that cost onto my Landlords in the future. Now of course, Landlords would also be able to offset higher letting charges against tax, but I (as I am sure they) wouldn’t want them out of pocket, even after the extra tax relief

So what does this all mean for the future?

The current application fee for a single person at my lettings agency is £200 and for a couple £250...meaning on average, the fee is around £225 per property

I am part of a Group of 500+ Letting Agents who share knowledge and experience, and recently we had to poll to find the average length of tenancy in our respective agencies. The Government says its 4 years, whilst the actual figure was nearer one year and eleven months, so let’s round that up to two years

That means £225 needs to found in additional fees to the Landlord, on average, every two years

In Actual Pound Notes 

In 2005, the average rent of a Sunderland Property was £526 per month and today it is £604 per month, a rise of only 14.7% (against an inflation rate (RPI) of 38.5%)

Using the UK average management rates of 12%+VAT, this means the Landlord will be paying £870+VAT per annum in management fees

If the Landlord is expected to cover the cost of that additional £225 every two years, rents will only need to rise by an additional 2% a year after 2018, on top of what they have annually grown by in the last 5 years

So, if that were to happen in Sunderland, average rents would rise to £678 per month by 2022  (see the blue line on the graph) and so the Landlord would pay £976+VAT per annum in management fees...which would go towards covering the additional costs without having to raise the level of fees

...but that is bad news for Sunderland Tenants?

Quite the opposite. Look at the red line on the graph. If the average rent Sunderland Tenants pay had risen in line with inflation since 2005, that £526 per month would have risen today to  an average of £729 per month (remember, the average today is only £604 per month)...and even if inflation remains at 2% per year for the next six years, the average rent would be £789 per month by 2022...meaning even if Landlords increase their rents to cover the costs Tenants are still much better off, when we compare to the £678 per month figure to the £789 per month figure


The banning of letting fees is good news for Landlords, Tenants and Agents

It removes the need for Tenants to find lump sums of money when they move. That will mean Tenants will have greater freedom to move home and still be better off in real terms compared to if rents had increased in line with inflation

Landlords will be happy as their yield and return will increase with greater rents whilst not paying significantly more in fees to their lettings agency. Letting agents who used to charge fair application fees won’t be penalised as the rent rises will compensate them for any losses

.. and the agents that charged the silly high application fees...well that’s their problem. At least I know I can offer the same, if not a better service to both my Landlords and Tenants in the future in light of this announcement from Phillip Hammond

I'm keen to get your thoughts on this article and how you think the banning of Letting Agent fees may impact on the Sunderland rental market?

Friday, 11 November 2016

Super-Cheap 2 x 1 Bedroom Flats - Cash Buyers Only Due to Short Leases (24% Gross Yield)

These two 1 bedroom flats (ground floor and first floor) are being offered For Sale together for a bargain basement £34,950

The catch is that the leases have less than 70 years, meaning at best the choice of mortgages may be limited or at worst it may suit cash buyers only

Either way you'd need to factor in the cost of extending the lease as part of your long term exit strategy

They should rent at £350pcm each meaning you'll return £8,400 per year rental income which works out at 24% Gross Yield!!!

A further note of caution before you get too excited, they appear to be in decent condition so it should be possible to attract working tenants (we manage a couple of small houses on this estate and rent them to working people) but you may need to consider DSS at a push

They're being marketed by Pattinson so contact them to get more details or arrange a viewing

Call me if you'd like to discuss this or any aspect of property investment in Sunderland - call me on 0191 567 8577 or email

Considering a Multi-Let Strategy in Sunderland? Don’t Get Caught Out By Article 4 As It Could Seriously Affect Your Profits!

I’ve been contacted by a number of investors in recent weeks who have purchased properties in Sunderland to rent out on a Multi-Let room-by-room basis

I suspect this Multi-Let strategy is going to become much more popular in years to come as it is a great way to maximise rental income from a property, which will become even more vital when the Landlords mortgage interest relief changes start to bite

It may be a coincidence but all the investors I’ve recently spoken to who’ve purchased properties in Sunderland with a view to “Multi-Letting” them have been from outside the area and all seemed to be somewhat in the dark about the important requirement to obtain planning permission before changing the use of properties in certain areas in Sunderland from a ‘single dwelling’ to an HMO

You have to question the advice they’ve been given prior to purchase so I thought it worth spelling this out as it has important implications that could seriously affect the profitability of a potential property purchase

So what are Article 4 Directions? Essentially councils have been given the power to restrict the change of use from single dwellings to HMO’s in areas where they think too many HMOs may cause a problem

In Sunderland, this has been applied since December 2013 in the following Wards - Barnes, Hendon, Millfield, St. Michael's and St. Peter's

Outside of these areas you’re still OK to move between Use Class C3 (single dwelling) and Class C4 (Small HMO) without the need for planning permission to be obtained

Planning permission will normally be required to change from a Class C4 HMO (3 to 6 occupants) to a large HMO (more than six occupants)

If the property has previously been used as an HMO then there is no change of use so you do not need to apply for planning permission

The advice from the Sunderland City Council website is pretty clear

The impact of an Article 4 Direction is that all new HMO accommodation commencing from 16 December 2013 in the wards covered by the Directions will require planning permission. For this reason If you are considering purchasing an HMO, establishing a new HMO or increasing the number of occupants in an existing HMO then you should seek advice from the Development Management Section as to whether the use could be considered lawful or if it requires planning permission

The council website has lots of useful information here

Applying for planning permission for the above change of use is free and should take around 6 – 8 weeks from the point of application

Crucially you don’t need to own the property to apply, so investors considering purchasing a property for a Multi-Let (that has previously been used as a single dwelling) in one of the affected areas should consider applying for planning permission prior to exchanging contracts as part of their due dilligence

Not to do so risks taking a serious dent in your rental income!

For example a good standard 4 bedroom mid-terraced property in Sydenham Terrace in the Barnes Ward could be rented as a single dwelling for between £595 - £695pcm (depending on condition etc)

Renting the 4 rooms (assuming 3 good size doubles and a single) on a Multi-Let room by room basis can return around £1,200pcm – getting close to double the maximum single dwelling rent!

So if you’ve based your purchase on Multi-Let strategy returns, either ensure you get planning permission for the change of use before exchanging or make sure that the Plan B of renting it as a single dwelling also works for you

Finally there does appear to be confusion over whether this change of use permission is linked to needing an HMO License – let me make it clear – it isn’t

In Sunderland you would currently only need to apply for an HMO License if the property had over 3 useable stories and was rented by 5 or more individuals from 2 or more households

So a 4 bedroom property rented room-by-room in one of the affected Wards would be an HMO but wouldn’t need a license, but it would require change of use permission if previously used only as a single dwelling

I hope this makes the position a little more clear for those considering a property to rent out as a Multi-Let in Sunderland

Please feel free to give me a call on 0191 567 8577 or drop me an email ( if you’d like to discuss any aspect of property investment in Sunderland

Thursday, 10 November 2016

Tenanted 4 Bedroom End Terrace Close to Pallion Metro & Shops (9% Gross Yield)

This 4 bedroom end terrace is currently tenanted earning £7,200pa rental income and is for sale by auction with a Guide Price of £72,000...

...that makes it worth a look 

Based on the assumption that most properties go for at most +10% of the Guide Price, if you get the promised £7,200pa rent (£600pcm, which seems reasonable to me) and pay no more than £79,200 it will deliver 9% Gross Yield

The £600pcm rent is based on letting it as a single AST and the property may suit a Multi-Let strategy renting it room-by-room on a bills included basis to working people - as it is in the Pallion Ward you don't need to worry about Article 4 change of use as highlighted in my recent blog post
It's being advertised by Anthony James so click here for details and contact them to arrange a viewing

Give me a call if you'd like to chat about this or any aspect of property investing in Sunderland - call 0191 567 8577 or email

Wednesday, 9 November 2016

"Needs Work" 3 Bedroom Terraced Cottage in Pallion (8.5% Gross Yield)

This large cottage in Pallion needs work (especially to the bedrooms in the dormer) but once completed it should get good tenant interest and deliver a decent return

It's got one downstairs double bedroom, two upstairs bedrooms in the dormer and a further 'storage room' in the dormer that needs plastering but could make a further study, nursey etc

Image 1 of 13: Main

The vendor is motivated to sell (I've met him) and has already reduced the price a couple of times to the current 'offers over' £57,000

If you can get it for no more than £55,000, spend £10 - £15,000 on bringing it up to a good standard it will rent out at £495pcm, giving 8.5% Gross Yield

Its being marketed by Dowen so call them for details and contact them to arrange a viewing

Give me a call if you'd like to discuss this or any aspect of property investment in Sunderland - call 0191 567 8577 or email

Monday, 7 November 2016

"Ready to Let" 2 Bedroom Apartment in Popular Royal Courts

This 2 bedroom ground floor apartment is new to the market and looks to be in immaculate condition that's ready to let

Royal Courts is popular with a range of tenants - both young professionals and students due to the location close to the City Centre, Park Lane Interchange and University 

Image 1 of 8: DSC 0827.jpg

It's being advertised by Peter Heron for £82,500 which based on achieving a £495pcm rent will return 7.2% Gross Yield - granted it's not the best return (and you'll need to factor in service charges etc) but I do know some investors prefer to have low-maintenance apartments like this rather than trade off more hassle & repairs from buying houses in order to get a better return

Click here for details and contact Peter Heron for more info or to arrange a viewing

Call me to chat about this, buying apartments in Sunderland or any aspect of the Sunderland property market - call 0191 567 8577 or email