Assetz® News - Finding a French bargain

Finding a French bargain

6th April 2009 |

For private investors in the buy-to-let sector, the current period is one of both threats and opportunities. The latter may come in the form of lower prices, meaning that wise money spent on good acquisitions could bear fruit in the long term. However, a recession may also bring some threats.

One area of this is where the tenants are unable or unwilling to pay the rent on time, something that could cause financial strife for landlords and, in the worst cases, repossession. One possible problem is that of unemployment, although those who lose their jobs and claim benefits will be able to get the money to pay for this. Those who are slow in doing so may provide a problem.

But a larger difficulty may have emerged in the past year with those who are already on local housing allowance (LHA). Until 12 months ago, there was an option for this benefit to be paid straight to landlords. However, the rule then changed and the money was automatically given to the tenant, who had the full responsibility for paying up.

To the National Landlords Association (NLA), this has posed a major problem, as the rent has not always been passed on, causing the kind of non-payment difficulty that could deepen financial woes. In such circumstances, it may not be surprising that the association wishes to see a change.

Research by the NLA of its own members has revealed that 52 per cent do not wish to let to the LHA sector, with another 43 per cent less keen to do so due to the rule change. This, the NLA points out, could mean this group is finding it much harder to find accommodation.

NLA director Richard Price said: "It is clear that LHA is not improving access to housing and has actually reduced tenant choice."

He added: "Empowerment is about giving people the right to choose. The current situation is not sustainable and the government must act to ensure that LHA tenants are not further disadvantaged."

Such an action could involve a change in the system back to the old way, which could be advantageous to both parties.

Taking up the cause of tenants recently were charities Shelter and Citizens Advice. They launched a campaign to raise awareness not of the circumstances of LHA claimants but bona-fide, fully paid up residents in rental property who have become homeless at very short notice due to landlords being repossessed.

This concern drew the response from the Council of Mortgage Lenders that where a buy-to-let mortgage is involved, there is an option for a receiver of rent to be put in place to pick up the rents from the tenants and use this to meet the mortgage payments. It is when a landlord has used a normal house purchase mortgage that this is a problem. Of course, it may be noted that a receiver of rent could also face difficulties if faced by LHA non-payers.

Nonetheless, it may be agreed on both sides that the new system of LHA payments needs reconsidering. If this happens and change comes about, it may do a lot to help bolster the future of the industry.