Ok, ok… so it’s blatant plagiarism of the famous quote from ‘we were on a break’ – Friends – 1997 – but it’s really apt when it comes to highlighting what some landlords have to deal with when a tenancy goes wayward.
The end of tenancy check out can be and often is a straightforward process however; if the property hasn’t been well maintained or there have been significant issues during the tenancy, the potential for disagreement and dispute is heightened.
It’s not that common….
Malicious damage to a rental property is relatively uncommon and certainly not at the apocalyptic levels that some articles would lead you to believe. But that said, landlords, can and do face this issue. When they see that their property that has been used as a cannabis farm, been left in such a state a typical student bedroom could be considered as quite sanitary, the experience can leave them disheartened, angry, frustrated and wondering whether it really is all worth it? Equally; the property may have been the victim of years of neglect or mismanagement so it’s never straightforward or easy to pinpoint a reason or apportion blame so processes need to be in place to manage any issues swiftly, efficiently and not at any cost to either the landlord or the tenant.
In a recent webinar – How to create detailed property reports and minimise disputes – I highlighted that despite 4.7 million households in the Private Rented Sector and 1.2 million people moving into, around and out of the ‘PRS’; disputes remain relatively low but there is a notable trend of tenants raising more disputes than agents or landlords.
This could be down to the fact that they are more invested in the tenancy process and certainly from reports seen, as tenants have the ability to comment directly into the inventory and or check out report (along with uploading their own pictures); it showcases that tenants are more interested and are paying more attention to reports and exercising their right to comment.
Based on currently available data from TDS – cleaning and damage remain the most reported issues when it comes to deposit disputes.
- cleaning – 26%
- damage to property – 20%
- redecoration -17%
- other – 9%
- missing items – 4%
- rent arrears – 2%
The cost to clean a property varies from region to region but generally prices can range from £95 up to £250 for an end of tenancy clean. This is however, very much predicated on the size of the property and how much cleaning is required and to the desired standard. The important thing to remember is;
It doesn’t happen to every landlord…
Damage to the property (and therefore cost) is more difficult to quantify until it happens. Data around exactly how many properties are returned in an unfit state is limited however, as highlighted in a recent NRLA article, the highest claim for malicious damage paid out by NRLA Property Insurance provider, Hamilton Fraser Total Landlord Insurance, was £44,289, to rectify damage and for loss of rent after tenants created a cannabis factory in a rental property.
It has to be noted as this is an extreme case; most damage is either accidental with even less highlighted as malicious, but whenever it does occur there is always a material cost to the landlord that isn’t always able to be balanced against the level of deposit allowed.
But to decrease the likelihood of damage and misuse; investing in accurate tenant referencing, insurance and in the property itself is key. Costs that all landlords (and agents) should include in the lifecycle of the rental include planning for regular refurbishment, once every 5 to 6 years, with contingencies built in for placement of appliances as and when they fail or become unsafe to lessen the potential for claims, damage and further financial loss. Guides on the lifespan of white goods / appliances – furniture life spans
The emotional cost is a very real factor when renting out property and shouldn’t be ignored. As someone who is not exactly considered as being a shy retiring type and can cope with almost any situation (21 years n the Prison Service helps you toughen up your coping skills and your vocabulary!), but even I had to sit down when I returned to my own rental property to find it in an awful state including matted dog hair IN the oven (yes IN)…
With the number of accidental landlords (those who rent out their property due to a change in circumstance rather than as part of a business or larger portfolio) considered to be up to 360,000 in the UK; many are not equipped to deal with the masses of legislation and safety requirements that underpin the PRS so the potential for the ‘uncommon’ to become ‘common’ is quite real.
…and it is a big deal!
The cost to put a property back into the rental sector after cleaning, damage / repair and or replacement of items can be substantial.
Howsy – an online letting agent – suggests that landlords need to save at least 1% of the property value to cover ‘running’ or maintenance costs. This could be as much as £4,746 in London and between £1,328 and £2,344 in other regions in the UK.
Further data from LV reveals that the average landlords are spending over £600 million on maintaining the rental property – an average £3,000 a year on general maintenance: renovations and refurbishments (£370), replacing/repairing (£370), fixing structural damage (£313), decorating (£265) and garden maintenance (£203).
Factors include damages by tenants, carpets (66%), walls (45%), white goods (27%) and doors (24%). Most money is spent replacing/repairing flooring (£322), white goods (£298), other items (£256), cleaning at the end of a tenancy (£178) and removing forgotten items (£149).
Void costs can be equally expensive – a void period of one month can cost a landlord £650 on a typical 2 bed property (regional variance apply) so it’s no wonder that checkouts are one of the most sensitive aspects of the tenancy. If not managed both efficiently and sensitively; conversations can quickly spill over into accusations, resentment, claims and more litigious conversations between landlords and tenants as the tenancy comes to an end.
It is therefore almost always recommended, both by industry professionals and the main deposit schemes, that check out reports (and inventories) are conducted by an impartial third party to avoid any potential issues or disagreements as they can provide an objective, balanced view and descriptive condition comments relating to the property and are often more able accurately apportion liability.
With the potential to be so divisive, costly and have the ability to lose tenants their deposit or the landlords right to access the monies, it makes sense that all parties talk to each other early in the process (and ideally beforehand) to ensure that issues don’t end up either full blown arguments with neither party willing to budge an inch or go as far as ending up in court.
Currently, of the 20,333 cases submitted to TDS (UK, Scotland, Wales and Northern Ireland), 75.5% of dispute applications were initiated by tenants with tenants/landlords relatively even when it came to awards. So bearing in mind the number of moves initiated in an average year (1.4m) and the number of disputes raised (TDS – 20,333) in percentage terms, disputes reflect only 1.45% of cases of those renting in the PRS and so clearly highlights that disputes are not as prevalent as some may think.
This has been further evidenced by DPS who state that in their review of 2020; £4m of deposit money had gone to landlords through its resolution service process and just 3% of all tenancies had ended in dispute.
And although disputes remain relatively low, is proptech the answer for ensuring they continue to remain so?
Software and IoT (Internet of Things)
They each play an important role in the lettings industry. With the pandemic accelerating the use of apps (proptech) that help property managers and suppliers to virtually access the rental property, conduct contactless viewings, support self service inspections for tenants and enable live inspections, lead by property professionals to triage maintenance and property issues.
Although proptech has been widely adopted both within the residential lettings industry; a recent sentiment survey released by mydeposits and Ome – derived from the responses of 14,200 private landlords, agents, and tenants – showcased that 16.3% felt that the rental market technology is out of date whereas only 39.64 felt it was ‘equal to everyday life’ which highlights a clear disparity in what the industry currently provides and what the user (landlords, property managers, agents, suppliers) want and or needs when it comes to proptech and services.
Technology and the future of growth remains challenging when it comes to delivering essential, fast paced, efficient and ‘fit-for-purpose’ services. But by developing the right tools, in conjunction with residential services, suppliers and property managers have an end-to-end solution that is flexible, customisable with features that provide:
- cost efficient data capture
- streamlined processes
- secure links
- enhanced communication and support functions
- internal messaging and SMS capability
- audit trails
- share history
- digital signatures
- responsive reports and actions
- offline capability
- comprehensive reporting options that minimise disputes
To ensure that damage remains an uncommon occurrence, that every tenancy doesn’t morph into a nightmare for the landlord and costs are kept to a manageable level; property professionals should be using a solution that combines an easy-to-use app and booking system, a unique ‘live’ meeting place to outsource reports and industry training that supports the learner at every step.
Inventory Base; Inspection and Property Inventory Software made simple – why look anywhere else?