There is a major problem, in particular in London, for people who rent their homes. Many of them are reluctant tenants – they simply cannot get on the rising buyers market. It’s a major problem.
Yesterday Ed Milliband announced that a Labour Government would intervene in the market – effectively placing a cap on rent rises. He wouldn’t interfere with the initial market setting – but would attempt to benchmark the uplift and then apply this notional figure in annual rises.
So in order to make this actually work he would need to alter the basic terms of an agreement. As now, a tenant would be able to terminate a tenancy after the first six months, with one month’s notice. A landlord could only do so with two months’ notice and if certain conditions were met – such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways. After the six-month probationary period, contracts would automatically run for a further 29 months – so a total of 3 years.
Milliband has suggested the RICS were helping with setting the average rises – something that has been denied by the RICS. This seems a little sloppy. I do know from the Institution that they do not take political sides. The RICS is apolitical.
I think this is a poorly thought out policy.
I have sympathy with those renting – and the inexorable rise in rents. But this is partly as a result of a lack of supply – and the market sorts that out itself. We do have a number of policies to provide more accommodation in the private rented sector. There are millions of pounds being currently placed in the market. Enough to make a difference. These investors and developers could easily be spooked by rent caps. Historically they have not worked.
What will potentially happen is that there will be a reduction in the numbers of houses coming forward. The market hates Government intervention and Governments of all colours think they can buck the market. In the majority of cases they simply can’t.
The North-South divide
Last week there was a deal reported in my property press – which just demonstrates the power of the Capital.
not available in foot asylum…
Valuation of shops is a bit of a black art – we zone shops on the principle that the front (window) is worth more than the back. Interestingly the technique is not actually written down in a code anywhere (RICS APC students please take note!).
Bond Street in London is generally regard as the most expensive retail address in the UK – last week a new tenant signed a lease for a shop – Boghossian are Swiss and sell luxury jewellery. They have agreed to pay £1,050 per square foot. This is the zone A rate – i.e. for the first 20ft depth …
Compare that with Clumber Street in Nottingham – where the latest deal reported is for Foot Asylum – who are paying a headline rent of £155 . But this is ignoring the incentives the landlord has offered, when you take account of these the rent drops on a comparable basis to £131.
So Bond Street is eight times more expensive to trade than Clumber Street. Wow.
Are Orange about to halve their bills?
No.
But they have merged with T-Mobile and this has presented them with an interesting situation. They have too many aerial sites. And they have come up with an ingenious solution.
They have identified sites which ‘are considered to be unsustainable in the current market’. And they want owners of the sites to consider varying a lease that exists. A number of my clients have received such letters. When I say they want to vary the arrangements they really mean slash the rent. If you agree then this will ‘provide greater certainty that the site will continue to be occupied for telecommunications purposes’. Note that this is not a guarantee just ‘greater certainty’. They go on to say ‘sites that are identified with high operating costs will be planned to be removed’. Not ‘removed’ just ‘planned’.
So what’s in it for the landlord? I have asked the agents who are acting and it seems in return for the lower rent it is simply greater certainty.
I had three questions:
1. Are you prepared to pay a premium for the variation – in other words give the landlord a lump sum to compensate.
2. Will you reduce my clients phone charges by half?
3. Are you prepared to give up your rights to renew leases under The Telecommunications Act?
The answer was no, no and no.
The latter is the real sting in the tail for landlords. Even though you have a commercial lease in place, the Telecommunications Act allows the telephone operator to ride roughshod over the principal Landlords & Tenant legislation – in other words you can’t terminate a lease once you let to an telephone operating company. In fact I don’t think you can over-ride these rights as per my question 3 – but it is fun to ask?
So, does this sound like a very sloping pitch – in the telephone operating companies direction? i think so.
In each case we have been approached we have declined their kind offer to accept half rent – but I think it was a reasonable compromise to get the phone bill halved? They don’t think so!