Beware the pitfalls of being a landlord
Continuing his series of property articles, estate agent Trevor Cooper looks at newcomers to the buy-to-let market and the advice offered by the Guernsey Private Residential Landlords' Association and States website.
Continuing his series of property articles, estate agent Trevor Cooper looks at newcomers to the buy-to-let market and the advice offered by the Guernsey Private Residential Landlords' Association and States website.
LOCAL estate agencies are reporting a marked increase in both local and open market rentals.
The increase in demand has corresponded with – and is perhaps in response to – the growth in first-time landlords purchasing buy-to-let properties.
This trend gathered pace during 2006 and 2007, but waned with the recent uncertainty in the housing market and tightening resources for buy-to-let mortgages.
Nevertheless, speculation in property continues to be viewed as one of the better long-term investments in the current volatile economic climate, as investors recognise the benefits of a tangible asset.
But being a new landlord is not easy, as an ill-prepared proprietor will soon discover – possibly to his or her cost.
The letting and rental of a Guernsey property is not governed by England's Landlord and Tenant Act introduced in 1954, updated in 1985 and further amended in 1988 and 1995.
The Act is cumbersome and invasive but clearly dictates the responsibilities of landlords and tenants and requires certain standards of accommodation.
So what guidelines are there for new landlords in Guernsey? The States website www.gov.gg/
privaterentalsector has pertinent facts and advice for landlords and tenants and there is also practical assistance available from the Guernsey Private Residential Landlords' Association, or GPRLA.
The GPRLA was formed in 2007 as a 'not-for-profit' body to be a recognised voice and face to represent the views of landlords in the private residential letting sector. Since the association's creation it has worked with several organisations, notably States Housing and the Income Tax Authority, the Citizens Advice Bureau, the Fire and Rescue Service and Environmental Health.
Matters discussed have included the effect that certain tax changes would have on the rental sector, how sub-standard accommodation could be improved and whether this could be done voluntarily or if legislation might be required, plus whether it would be possible to create a register of lodging houses and what that would entail. The association has produced a standard tenancy agreement, or lease, for its members with the assistance of local advocates and the Law Officers, as well as a booklet entitled A Landlords Guide to Residential Letting and Code of Good Practice, which speaks for itself.
The object of the tenancy agreement was to create a plain English document in an attempt to demystify some of the legal jargon that complicates many leases.
Too many tenants, and indeed some landlords, will commit themselves to a legally-binding lease believing they understand its ramifications or, worse still, not fully understanding the document but assuming it must be correct and therefore best agreed to.
Basic disputes between landlords and tenants – regardless of actual fault – are often due to misinterpretation or a lack of awareness.
This is what the GPRLA tenancy agreement aims to address.
On a point of reference, a lease or tenancy agreement is not essential, nor is even a rent book, for a tenancy to be created but without any of them the potential for dispute is unthinkable.
The association's guide and code of good practice booklet is soon to be revised, as if to illustrate how quickly matters evolve. The present 26-page booklet from April 2009 remains relevant, however, and summarises fundamental issues such as the key elements of a lease, how some non-locals are granted local market housing licences and an assessment of accommodation standards.
The section on health and safety pays particular attention to legal requirements and recommendations for electrical and gas supplies – topical in view of the States Environmental Officer, Val Cameron, recently asserting that landlords in Guernsey should pay for regular health and safety inspections to protect tenants.
The Health & Safety (Gas) (Guernsey) Ordinance 2006 already requires landlords to provide annual safety compliance certificates from a registered Gas Safe engineer for every gas appliance, but Ms Cameron believes the existing system does not go far enough.
Also in the GPRLA guide are tips on finding and assessing prospective tenants, taking up references and how to conduct the handover of the property. Possible problems during the tenancy such as chasing rent arrears, repossession and eviction are also referred to.
Checking out tenants at the end of the tenancy, assessing any damage, as opposed to fair wear and tear, and the return of the deposit are covered and there is a brief explanation of the Statutory and Excess Repairs Allowances landlords may claim on Income Tax returns.
Apart from the Income Tax office, which requires tax to be taken at source on each and every rent payment made to non-Guernsey resident landlords, other parties with an interest in a landlord's activities are mortgage and insurance companies.
Permission to let any part of a property to tenants must first be obtained if there is a mortgage secured on the premises and the insurance cover could be invalidated if the insurance company is not informed about the property being let to tenants.
All this clearly shows that being a landlord is not an easy undertaking, so the guide also includes a list of useful contacts and further points of reference to assist those in doubt.
The GPRLA also has a straightforward website, www.gprla.org, and occasional open evenings where invited guests have spoken on matters ranging from fire precautions, domestic heating, sound installation and insurance of rental properties to the services and anecdotes of local estate agents.
In fact, it was mentioned at a recent open forum that the association, whose council members are all volunteers with immense experience in property letting, is exploring how a lettings mediation service could be established in Guernsey to save or, at least, lessen the need for arbitration or court proceedings in any disputes.
The association's AGM is on Monday 25 June at 7.30pm at the Guernsey Yacht Club meeting room on the Castle Emplacement. Non-members are welcome to attend, although not able to vote on any proposals.
Application for membership can be made on the night or is available any time from the GPRLA secretary through the association's website.
The subscription is £20 per annum, irrespective of the number of properties a landlord, company or agent may have.
Landlords can also employ the services of lettings and property management agents – and their experience can be invaluable.
Not all agencies in Guernsey charge or do the same, however. Some require registration fees in advance and some charge administration costs in addition to the quoted commission rate for unexpected yet routine matters such as organising repairs to be carried out.
n Reviews of Guernsey's rental market will follow in future weeks, together with help and tips for tenants.
