Bailiff Crisis Puts South London Landlords at Risk

A severe bailiff crisis is brewing in the UK, and South London landlords are particularly at risk.

The number of County Court bailiff evictions being put on hold or cancelled is increasing, due to a lack of Personal Protection Equipment (PPE) for bailiffs. This is compounded by the historic lack of investment in the courts, and rising interest rates, which are sparking landlord panic to exit the rental market.

In Q1 2023, landlord repossessions in the county courts rose by 69% in comparison to the same quarter in 2022. This is before Section 21 is abolished and more eviction cases end up in the courts.

Landlord Action, an eviction and housing law specialist, is calling on Judges at County Courts to start granting leave to transfer more eviction cases with serious arrears to the High Court to share the burden of rising workload.

Some landlords have already waited more than six months to reach the point of eviction and are being financially crippled by the delays. In one case, a landlord waited 16 weeks from the date the possession order was granted to the date the bailiff appointment was confirmed. However, the bailiff then called to say that the eviction could be delayed due to the PPE issue.

Paul Sowerbutts, Head of Legal at Landlord Action, says: "We've offered our client the opportunity to re-apply to have his case transferred up to the High Court, but naturally there is a reluctance as this is yet another cost for the landlord. Whilst the High Court could help alleviate the delays, it won't solve the crisis we are facing."

Daren Simcox, CEO of High Court Writ Recovery, a private bailiff firm, says that the number of County Court bailiffs employed by courts to attend evictions has been waning as government policy has affected team sizes. This means that some bailiffs now cover multiple courts, resulting in unmanageable workloads.

He adds: "The bailiffs simply don't have the time to wait, so if there is a problem on the eviction day, they are moving on after 10-15 minutes leaving cases unresolved.

"The current wait time for possession in some cases is 37 weeks from claim to possession – that's nine months and simply isn't acceptable. Judges should be granting permission to transfer up to the High Court as a matter of course, given the current circumstances."

If you are a landlord in South London, you need to be aware of the bailiff crisis and take steps to protect yourself. Here are a few things you can do:

• Start the eviction process early. The sooner you start, the sooner you will be able to get the eviction completed.
• Be prepared to pay for a High Court eviction. This is usually more expensive than a County Court eviction, but it is often quicker.
• Work with a qualified eviction lawyer. They can help you navigate the legal process and protect your rights.

If you are interested in knowing more or you are curious as to what your rental property is worth today drop me a line and pick my brains or use my free online valuation tool to get a ballpark figure!

Quarter of Young Tenants in South London Admit to Subletting

A new survey has found that a quarter of young tenants in South London admit to subletting their rented properties. The survey, conducted by Direct Line, found that the most common reason for subletting was to offset the cost of rent. Other reasons included wanting to make some extra money, having friends or family stay over, or needing to move out temporarily.

The survey also found that young tenants are more likely to sublet than older tenants. This is likely due to the fact that young people are more likely to be living in rented accommodation and are therefore more likely to be struggling to afford the rent.

Subletting is a risky practice, as it can lead to eviction, fines, and even legal action. Landlords have the right to evict tenants who sublet without their permission, and they can also sue tenants for any damages that are caused by the subletting. It is after all, a breach of the tenancy agreement. Despite the risks, the survey found that many young tenants are still willing to sublet their rented properties. This is likely due to the fact that subletting can be a way to make some extra money or to have more flexibility in their living arrangements.

If you are a young tenant in South London and you are considering subletting your rented property, you should carefully consider the risks involved. You should also make sure that you have the permission of your landlord before you sublet.

What does this mean for landlords? Well, some operate a "hear no evil, see no evil" policy, as long as the rent gets paid it's fine. But what if your tenant is subletting the whole property on a holiday let platform like AirBnB? This puts your lease at risk of forfeiture (if the lease prohibits commercial letting, or stipulates it must be used as a residential dwelling) or your mortgage company might call in the loan. After all, the property is being used for a purpose other than what they were lending you the money for. So it does come with risks, and no rewards for the landlord. It may also cause a nuisance to the neighbours, who will be all too keen to highlight to the local authority that the property is being let on a nightly basis for more than the 90 days which are allowed in any one calendar year. Short term guests can be a noise nuisance, and of course long term residents feel safer when they know their neighbours as opposed to when they do not.

So what to do? Well, a blind eye can be turned to speeding, little white lies and so on... as long as nobody gets hurt. Ultimately though someone will get hurt - a neighbour upset due to noise, the local council with you for flouting the law - it will catch up to you. So make sure that you are aware what is going on in your property by doing regular inspections! If you'd like further advice on letting, short or long - drop me a line and let's talk.

(Is There Trouble With) Houses in Multiple Occupation (HMO), Anyone?

I’ve had a busy week answering lots of questions from landlords and one asked me about multi-lets. He was worried about HMO regulations and the like, something that you may have heard of.

“Should I be worried?”

“Do I need a license?”

“How much does it cost?”

“If I don’t get a license will I get caught?”

Well for starters what is an HMO? With houses in multiple occupation imagery of derelict bedsits come to mind don’t they? Nothing is further from the truth in London. A lovely 5 bedroom Victorian residence can be considered an HMO as can a bedsit squalor.

The following is defined as an HMO by the national HMO network:

• An entire house or flat which is let to 3 or more tenants who form 2 or more households and who share a kitchen, bathroom or toilet.
• A house which has been converted entirely into bedsits or other non-self-contained accommodation and which is let to 3 or more tenants who form two or more households and who share kitchen, bathroom or toilet facilities. 
• A converted house which contains one or more flats which are not wholly self-contained (ie the flat does not contain within it a kitchen, bathroom and toilet) and which is occupied by 3 or more tenants who form two or more households. 
• A building which is converted entirely into self-contained flats if the conversion did not meet the standards of the 1991 Building Regulations and more than one-third of the flats are let on short-term tenancies. 
• In order to be an HMO the property must be used as the tenants’ only or main residence and it should be used solely or mainly to house tenants. Properties let to students and migrant workers will be treated as their only or main residence and the same will apply to properties which are used as domestic refuges.

There’s a few terms thrown in there like “household” which is defined to death also but in layman’s terms – anyone eating or doing washing together or family-related.

Therefore three friends sharing together are considered three households. If a couple are sharing with a third person that would consist of two households. If a family rents a property that is a single household. If that family had an au-pair to look after their children that person would be included in their household.

BUT…

An HMO is not necessarily a LICENSABLE HMO. When asked about HMOs this is generally what people refer to, as quite frankly, if it has no effect on anything else then why bother calling it an HMO??

What properties need a license? Simple: You need an HMO licence if you own or manage an HMO that is:

• three or more storeys AND
• let to five or more people AND
• made up of two or more households.

So if it doesn’t satisfy all 3 above, then you don’t need a license. In essence what one will find is that letting a large property as an HMO brings all sorts of problems. A lot of investors do it this way, but personally I’m not a fan… reasons below:

• Tenants moving in and out all of the time
• You will need to readvertise rooms regularly (tenants might not get on etc)
• Carry out inspections at every changeover
• Deal with deposit return and other admin every time someone moves in and out
• Tend to repairs more regularly as people treat the property less well (short term views)
• HMO regulations insist on modifications such as fire alarms, fire doors (shame to get rid of beautiful period doors for instance)
• Tempted by high returns but left high and dry with voids due to difficult tenants
• Once a property is registered as an HMO it wouldn’t likely be considered to be a family home for potential purchasers (stigma) hence limiting capital growth
• Finance may be more difficult to obtain as the investment is seen as higher risk – a higher deposit would mean tying up more capital than with other investments.

So in answer to my dear landlord above, costs are substantial. These vary per council of course but Lambeth will want up to £250 PER ROOM PER YEAR upon initial application (discounts available for “Accredited landlords”) which go down a little bit upon renewal, but eat into income of course. As well will your costs of sorting out fire alarms and ripping out your lovely period features. However proceed without a license and you will leave yourself open to prosecution. They have clever ways of picking this up, not just limited to checking how many people are on the council tax bill…

My professional opinion would be to limit the number of tenants to 4, perhaps taking a slight hit on the rental achieved in order to get the capital gain, but in all honesty the better yielding properties (and better for capital growth) have thus far been smaller units.

So bigger units? Great for diversification of course as there is usually a steady demand for family homes, and increasingly so as more and more properties are being chopped in to flats. Perhaps a good long termer, but in the short-medium term look at smaller units. Just look at the yield for now and build cash flow. This way with relatively small deposits one can build a portfolio which you can then diversify with acquisition of (larger) period properties. The problem with older stock is that it appreciates, but the yield is generally less good. This means that you will have to pay a higher deposit because the banks will require that the rent is 125% of the interest payment (always calculated at 5%, to allow for rate rises). Let’s compare two purchases:

A Victorian £400k 1bed flat will rent at 1500ish in a good part of SW2 or SW4.

• That’s £18k per annum rent
• Divide by 1.25 means your max interest payment is £14400 per annum
• Divide by 5% and the max loan you can get on this property is £288k, which means a 112k deposit.
• Realistically you will get a rate around 2.5% so will yield you £900gross per month yield

Ex-local 3bed for £300k in Streatham/Brixton Hill will let at the same money (worst case)

• £18k per annum
• Divide by 1.25 means your max interest payment is £14400 per annum
• Divide by 5% and the max loan you can get on this property is £288k, but capped to 80%LTV, so loan of £240k
• The difference between the mortgage and the rent here is 700pcm at 2.5% BUT you’ve only tied up 60k.

So you can buy two of these for the price of a Victorian. So your 120k will make you £1400pcm gross, not £900pcm. Plus of course the capital appreciation in the long run. HMO or smaller units, I know what I’d do if I was starting a portfolio or adding to a small one.

As always give me a call on 020 3397 2099 for a chat or drop me a line: jeroen@xandermatthew.com – always on hand to answer any property related questions.