Buying a Property? Key Questions to Ask.

lost man in a boat

Whether you are buying your first home, a holiday home or an investment property, there comes huge financial commitment, and for some, the largest financial investment of their life, not to mention what can be a confusing and  stressful time.  With such a large financial commitment, you want to make sure you have all the information at hand to guarantee you are purchasing a worth while investment. So rather than feeling lost at sea, we here at Davis Brown are here to guide you in the right direction with key questions to ask prior to placing an offer on a property:

What is the Tenure?   Is the property Freehold or Leasehold?

What is included within the demise?  Demise refers to the premises that has been transferred in the lease. Often a roof terrace may not be demised to the property and can in fact be communal. Make sure you get all the facts! In addition, you may find a storage unit/garage is demised to the property.  

Close up of industrial bricklayer installing bricks on construction site

What is the length of lease?  Having a short lease can at first seem great as the purchase price would seem ‘cheap’ – but don’t be fooled, to renew a lease can cost tens of thousands of pounds.

How much is the service charge?  This is a charge made for the maintenance on a property which has been leased. This can sometimes take a large chunk out of your rental returns and therefore it is worth making sure it is not too excessive.

English cottage garden.

Is there a sinking fund?  A sinking fund will cover repairs for the building. If there is no sinking fund, you might be digging deep into your pocket for any essential building repairs.

How much is the ground rent?  This is the rent paid under the terms of the lease by the owner of a building to the owner of the land on which it is built. This is usually a small charge; however, it is certainly worth taking note of the cost.

Is the vendor in a chain?  If the vendor is buying a property and that sale falls through, would this affect your purchase?

A Panoramic of the London skyline

What works have been carried out?  You will get a feel whether the building has been well maintained if external decoration and roof works have been carried out recently. It is important to know when the roof was last replaced, and the external façade was last decorated.

Are there any scheduled works within the building or surrounding area?  If so are these covered under the service charge and sinking fund?  

Is the agent or the seller aware of any new developments in the surrounding area?  Demolition and extensive development will be noisy!

Let board DB

What is the rental value?  It is worthwhile knowing what the potential rental value would be should you ever decide to let the property. Calculating the yield will show you the rate of return on your investment.

What is the EPC rating?  The Energy Performance Certificate shows the energy efficiency rating from A (most efficient, to G (least efficient) and is valid for 10 years. If you are planning on renting the property, the landlord would require a property with an EPC rating with an E or above.

Is there scope to extend?  With each extension comes an increased return (subject to current market). With room to extend, whether in the loft, an additional bedroom, garage conversion or another bathroom, having the room to extend maximises the potential growth of your investment.

Where is the nearest train/tube station & bus route?  Properties that are located close to transport links come at a premium – but a worthwhile one! Properties that are located within proximity to transport links will always be an attraction should you decide to sell later down the line.

London, the UK. Red bus in motion and Big Ben, the Palace of Westminster. The icons of England in vintage, retro style

What schools are in the surrounding areas?  Is the property set within a school catchment area? Properties that are historically increase in value over time as there will constantly be a demand for Real Estate within proximity to highly regarded schools.

What parking options are available?  Permit Vs allocated off street!

Who are my neighbours?  It’s worth while making sure you don’t have an Air BnB next door!

Colored doors in an alley of London

Who are the managing agents?  Research who the managing agents are? Do they have a good reputation?

How close are the amenities? Having supermarkets, restaurants & cafés within a short commute would increase the rental price as these are all attractions to prospective tenants.

Residential Lease Extension – Proposals for Reform

Over recent years there has been much anger expressed about the complexity and cost of extending leases and the government has stepped in and said they are looking in to alternatives. The Law Commission has been briefed to come up with options to reduce the premiums payable on lease extensions while ensuring appropriate compensation is paid to the landlord – what most people would call a no-win situation.

On 20 September 2018, the Law Commission published its paper laying down some options for satisfying this seemingly impossible task.

Proposals Put Forward by the Law Commission

The least radical proposal for reform put forward is to keep the valuation method essentially as it is now, but to prescribe rates for some or all of the more contentious elements, namely: relativity, the value of Act rights, and the capitalisation and deferment rates. There might still be a dispute on the freehold value of the flat but, once established, the rest of the valuation would be straightforward. There would still be much to debate on what the prescribed rates should be but, once fixed, the opportunity for arguments would be much reduced.

A more radical proposal is to stick with the current approach but ignore marriage value. The landlord would only be entitled to be compensated for loss of the deferred freehold value and the capitalised rent. The abolition of marriage value would significantly reduce premiums and simplify the valuation process but, as marriage value exists, it would mean depriving the landlord of the full value for the asset being expropriated.

As an alternative, the compensation could ignore the value of the landlord’s asset altogether and be calculated as a multiplier of the ground rent. A formula based on 10 times the ground rent has been suggested in parliament. The problem with this approach is that the level of ground rent is often arbitrary – a flat in Skegness might have a ground rent which is significantly higher than that of a flat in Mayfair – and the landlord would receive no compensation for the loss of the reversion. It might work for very long leases where there is no reversionary value but in most cases, it would lead to the taking of property without payment of an amount reasonably related to its value.

Another “simple formula” would be to set the premium as a percentage – say 10% – of the freehold value of the flat. This, though, would result in premiums which do not reflect the different lease lengths or any difference in the ground rent payable. A 25-year lease could be extended for the same cost as a 125-year lease.

The Law Commission has suggested that it might not be appropriate to have a “one size fits all” method of valuation. Perhaps there could be a different method for valuing flats which are homes rather than investments or there could be a different scheme for low value claims. It has invited views on its proposals and it will be interesting to see what emerges from this process in due course.

 

Generation Rent

real estate rent concept - old key with tag

A generation of young adults who, because of high house prices, live in rented accommodation and are regarded as having little chance of becoming homeowners.

Last week it was reported that 60% of Londoners will be renters by 2025*. We regularly see the phrase ‘Generation Rent’ splashed across our papers. With a city of renters and demand for decent rental properties at an all time high, we talked to one of our Surveyors -John Eden, who is currently renting in Maida Vale and has been a tenant for the last 6 years.  He says ..

“‘For many people, buying a property would mean big compromises -moving to a less desirable location and facing other costs such as commuting fares, being further away from friends and family and fewer work opportunities.”.

In areas where there is a shortage of housing and inflated prices it is no surprise that we have a generation of renters.  But is Generation Rent such a bad thing?

“Renting provides flexibility – you are not trapped in to a mortgage or a slow market, so if your life changes (new job, move to a new area, growing family, etc.) you have increased flexibility, plus moving while renting takes a comparatively shorter time than if you had a house to sell & another to buy.  It removes the ‘hassle factor’.  As a tenant, your landlord is responsible for repair, buildings insurance and general maintenance. ‘When anything has broken (whether it is the boiler, blocked drains, leaking pipes, exploding dishwasher, etc.) I have been able to arrange to contact the Landlord to get it repaired and at no money or time spent by me.”

It is reported that Millennials spend a yearly average of £6,589  on nights out**. This suggests that – to millennials – disposable income for a social life is more important than spending it on mortgages and the upkeep of a home. For many renters, a short commute to work and living close to friends and family is important. Renting allows for many people to live in areas where they might not be able to afford to buy.

John considers Generation Rent ..  “It is not strictly a good or bad thing, depending on how it evolves. The important thing about renting a property is about maintaining a good relationship between landlord and tenant. This means being aware of the rogue landlords and agents, but also for landlords to be able to suss out over-bearing tenants.  When there is a healthy relationship between landlord & tenant there should be no problems, and if they are, the are easily resolved. Hence why I have so easily been able to renew my tenancy each year.”

There are obviously some downsides to renting, particularly for families who are usually long term tenants. John points out that “As you don’t own the property you are restricted to what changes you can make and what you can do within the property.”  Plus, not forking out a huge lump sum for a mortgage deposit won’t leave you any better off, in fact one of the reasons for pushing home ownership at a policy level is that you will pay far more for your rent over the rest of your life than you’d pay in mortgage costs, with no asset at the end of it. ***

We asked John about his long term plans… “Realistically if I had a young family the security of owning a property would become more important to me but in the immediate future I enjoy the flexibility of not being tied down and being able to live somewhere which would otherwise be out of my budget”.

*PWC

**Money Advice Centre

*** Independent

Keep your Heating Costs down this Winter

After a glorious Indian Summer, we are waving goodbye to sundresses and sandals, and saying (rather reluctantly) hello to coats, scarves and gloves, yes folks – Winter is coming!  But before you crank up that thermostat to keep your cockles warm, have a read of some myth busters when it comes to heating your home … .

B U S T – A –  M Y T H  No:  1

sauna

Contrary to popular belief there is zero point in turning the thermostat up to the max to heat the room quicker, if you want to get sweaty then fine, but if you just want an average temperature just turn it to what you need – turning it up high won’t heat the room quicker but it will cost you more money.

N O T  A L W A Y S  B E S T  T O  L I S T E N   T O  T H E  T A L K   O N   T H E  S T R E E T (listen to this talk on the heat …. !) 

Energy labels with home on white background. Vector illustration

How many times have you heard people say it’s far more energy efficient to always keep the heating on a constant low temperature, rather than switching it on & off?  This is not the way to go about heating your home, if you have an efficient heating system then just turn it on and off as and when it’s needed, nowadays there are apps such as Hive which give you the option of heating your home remotely.  This is far more energy & economically efficient.

D O   G E T  Y O U R S E L F  I N T O  H O T  W A T E R 

hotbath

If you’ve been keeping your water heater on all day so you don’t run out, there really is no need to do this, to save your pennies make sure your hot water tank is properly insulated, then set the timer for half an hour in morning and this should give you all the hot water you’ll need until around midday.  Again, there are apps that will enable you to do this remotely.

“R O C K  D O W N  T O  E L E C T R I C  A V E N U E” 

elect

People often keep their electric storage heaters on full time as they’re not entirely sure how they work, this means that households with electric heating could be paying way over the odds as they may not be taking advantage of cheaper night rate electricity, for example.

As estate agents as well as block management agents, we see homes and offices all over London where energy is being used inefficiently, so much money can be saved on your energy supplies with a few very simple tweaks.

Could the Property Market be turning around for Landlords?

According to Home.co.uk during London’s recent property boom house prices soared ahead of rents. Investment fever drove prices up more than 50% in just 5 years, where rents only rose by 10% causing yields to collapse; however, over the last year prices have fallen by around 2.3% and rents jumped by 4.3%.  Although there are still some prime central London locations feeling the pressure of decreasing rents, many pockets of London have seen considerable growth in rents as well as rental yields, bringing a smile to many landlords and buy-to-let investors!

London-Eye-2009

Emma How, Director of Sales & Lettings gives us her insight …

“Comparing our data from Q3 2017 and Q3 2018, we have seen tenant enquiries increase by around 24%. We believe this increase in demand is due to the fall in supply because of tax changes (tax relief, loss of wear and tear allowance and 3% stamp duty levy), and landlords deciding to leave the market. In addition, increased activity in the commercial market has tempted some of our landlords with larger portfolios to consider converting blocks of residential flats into commercial offices.

Colored doors in an alley of London

Demand from international tenants remains strong from both students and professionals. Demand from professional tenants who were previously looking to buy has increased, while we wait to see what deal will be agreed when we leave the EU. This has also meant tenants are staying longer than 12 months.

Magnifying glass in front of an open newspaper with paper houses. Concept of rent, search, purchase real estate.
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Properties that are in good condition, well designed and stylish and have good amenities are being rented out quickly and at a premium as more and more tenants buy into the ‘lifestyle factor’.

real estate rent concept - old key with tag

We feel the private rented sector is a good place to be and with less stock available, it could drive rents up. As ever, it is important for landlords to be flexible and competitive. We believe that rentals will remain strong for the next six months as Brexit approaches.”.

HOW MUCH DOES IT COST TO RENT AN OFFICE?

It is sometimes thought renting conventional office space is the same as renting a residential property. As a result, many find themselves out of budget as they fail to factor in all the additional costs which need to be included.

Front view of a long office room with wooden floor, long tables with desktops and big ceiling lamps. 3d rendering.

When moving into a new office the initial costs can quickly add up. A tenant will often be expected to pay a rent deposit, which Is often in the region of 3 to 6 months’ rent depending on the strength of the company’s accounts. The offices are often not fitted out and often not in a condition to be occupied straight away. The incoming tenant should not expect to be allowed to fit-out the office until the lease has commenced, so they will need to consider what works need to be done and how long it will take. Depending on the condition and required specification the incoming tenant may wish to install meeting rooms, kitchenette, server, cabling, internet access or any other services or facilities. Often this may require a License for Alteration, which will be another additional cost that needs to be accounted for.

Many try cutting their ‘move-in’ costs by not instructing an agent or a solicitor to work on their behalf. Cutting professional fees however often comes back to haunt the tenants as they can end up agreeing to a lease much more in the Landlord’s favour. This can leave the tenant exposed to additional costs or obligations that they would have otherwise avoided.

Once the lease has begun the tenant should be aware that it is not solely the rent they have to budget for. Other costs that may be included could be;

  • Contribution towards Service Charge for the building’s management. This can vary depending on the level facilities and services within the building. These can include lifts, reception or air conditioning.
  • Contribution towards the Building insurance
  • Contribution towards a Sinking Fund to cover any additional works that would not be covered by service charge or insurance.
  • Business Rates Tax

A tenant must be aware of the terms within their lease, as may need to take professional advice and prepare for a future increase in costs. This may include a rent review, which often which often surprise tenants if they are not prepared for an upcoming review.  In a Full Repairing and Insuring lease, the Tennant is responsible for keeping the property in a good state of repair. This can leave the tenant liable for expensive repairing obligations if the property falls into poor condition.

Renovate a office building.

At the end of the tenancy the tenant is normally responsible for returning the office back to its original state. If this is not completed by the tenant before they vacate the premises they may remain liable and be forced to cover the Landlord’s costs of doing the works themselves. This can be expensive as the tenant will lose control over the cost of the refurbishment works. If they are moving into new offices at the same time this can become very costly!

If you require further assistance with renting an office, please do not hesitate a member of our team.

modern  loft office . 3d rendering concept

Urban Myth?

On your wanders around Westminster, have you ever noticed that each lamp post in the borough has 2 letter Cs interlocking, painted in gold on a black background?  Seeing as our office is slap bang in the middle of the City of Westminster, (Fitzrovia to be exact) it’s amazing how few people at Davis Brown have actually noticed this!  Having said that, our Estate Agents aren’t known to dawdle …

C

You would be forgiven for thinking this was the world renowned Coco Chanel logo, but is this really homage to the iconic French designer or just a piece of architectural design?  It’s true that the Duke of Westminster was madly in love with Coco in the ’20s, and it was rumoured that he decided to put her logo on all the lights around Westminster to show how she lit up his life. Well, I feel I’m about to disappoint all you romantics out there, but this lettering is also rumoured to merely mean “City Council”.  I know, how extremely un-glamorous!  There is also another, for want of a better word – squiggle, some might say, an elaborate letter W on all these lamp posts too, could this be the W from Duke of Westminster, or could it be the W from Westminster City Council?

W

Whatever you choose to believe, Coco Chanel’s spirit is still alive & kicking with her fashion legacy,  lamp post or no lamp post.

 

 

About Last Night …

DG&MrsNoseda

To say there may be a few sore heads in the world of property today might be an understatement – but boy, they sure are worth it!  We celebrated our 20th Anniversary of Independence in style at the beautiful Searcys Knightsbridge,  with around 60 friends & colleagues last night. The evening began with champagne, canapes & chats in full flow, with the addition of a fun competition whereby guests had to decide which of our Directors may or may have not sold a property to Will.I.AM or signed the Official Secrets Act and so on.  It turned out that Chris Gotla knew us the best and was the lucky winner of 6 bottles of top notch red.

EH&sauvingnonsozzlers

After a brief welcome by our very own Tony How, we were ready to tantalise our taste buds, so Tom Gilby – the highly skilled connoisseur from The Vintner, took the reins and led us into the fascinating world of wine with his sharp wit & superb knowledge.  We had six tables of guests, all lead by a Davis Brown director – The Rose Rebels was led by David Green, Champagne Charlies was Tony How’s (arguably the biggest cheat of the night!) team, Emma How (aptly) headed up the Sozzled Sauvignons, Tony Guerguis and his school of Chardonnay Sharks,  David Moon and his Beaujolais Boozers and last but not least Susan Battson was the matriarch of the Merlot Mavericks, and so the competition to identify the grape, vintage, country of production & price of each wine began. Rose Rebels displayed a pretty consistent knowledge most of the way through, leaving the rest way behind them, but were cruelly pipped at the post at the last minute by the Sozzled Sauvignons when they identified the mystery magnum.  Fluke?  We’ll never know.  I must say, David Moon (who is partial to imparting his knowledge of the grown-up grape juice) disappointed, by pricing a magnum of pretty special wine at only £50 (actual price £100.).  Must try harder.

TOMG

And that was far from the end of the evening, there were plenty more bottles of Chateauneuf du Pape, Viognier, Sauvignon Blanc and a whole host of other fabulous wines quaffed, suffice to say it was a thoroughly enjoyable night.  I won’t tell you who were the last to leave, but I will say that the more mature of our guests win in the stamina stakes!

THBeaujolaisboozers

A huge thank you to all who attended and helped to make it such a memorable evening.  Special mention to Susan Battson and Emma How.

TH

Rental Guide to Securing your Home

Having a place to call your own is something everyone dreams about, whether that be purchasing or renting. But when it comes to actually taking those steps it can be quite daunting and unfamiliar. With a huge variety of properties and agents to choose from, knowing the process can certainly help put your mind at ease. This is the 20 steps to securing your rental home …

Your Budget – Being able to understand what you can afford each month on rent alone is the perfect starting block, as going forward you would have to ensure you can keep up with your monthly rental repayments.

POUNDSIGN

Location Location Location – Somewhere quiet? The City Centre? Near to family or work? Each location offers unique benefits and varies in price, so finding which area suits your needs should be of high importance.

Bedrooms – What is the minimum & maximum amount of bedrooms you are looking for? 

Minimalistic classic bedroom, white interior design

Size – Do you have a minimum size you are looking for?

Furnished or unfurnished? – If you have your own furniture you would need to ensure that any property you find can come unfurnished and vice versa.

When do you want to move? – understanding when you are able to start a contract is important as you don’t want to be looking too early in advance. We advise to start searching for your new home 6-8 weeks prior to your ideal contract start date.

Time to start looking – Rightmove, OnTheMarket & Zoopla. These are the three main property search portals where you can find suitable properties matching your criteria. 

Colored doors in an alley of London

Make a shortlist – There will be a lot of properties to choose from, therefore we always advice to make a shortlist of your top 5 properties that match each of your requirements.

Getting in Touch – After finding properties that catch your eye, the next step would be to get in touch with the agent. Their details are found on the advert and you have a choice of calling them directly or sending them an email enquiry. If you email them, you should expect the hear back within 24 hours.

Schedule Your Viewing – Arrange with the Estate Agent a suitable time and date for yourself to view the property. The rental market is very fast paced and we therefore always advise viewing at your earliest convenience to avoid losing out on the property.

On the Viewing – When you are on the viewing, take a good look around and take your time. Ask as many questions as you can think of, as the more you know the more you can put your mind at ease moving forward.

Is it the one?! Decide whether the property is the one for you.

Let board DB

Submit an offer – Speak to the agent who showed you the property and advise them you wish to proceed and submit your offer. Within your offer, you want to include the monthly rental price, contract start date, length of contract and any conditions you may have (professional clean, removal of any items etc).

Offer Acceptance – The agent will then formally submit your offer to the landlord and revert with their comments. This usually takes between 24-48 hours.

Holding Deposit Transfer – Once the terms of your offer have been accepted, the agent will ask you to transfer a two-week holding deposit to show you are committed to the property and in turn will reserve the flat, withdraw it from the market and cancel all further viewings that are booked in.

References – Once a holding deposit has cleared in the agent’s client account, they will then commence with references. We advise gathering these documents whilst the agent is speaking to the landlord as it can help speed up the process and put you one step ahead. References usually include – passport, three months’ bank statements, three months’ pay slips, work reference/contract & previous landlord reference (if applicable).

Remainder of the monies – You have just received the great news that you have passed the reference checks – whoop! The agent will then request you transfer the remainder of the monies to them which include one month’s rent in advance, a further four-week security deposit and any additional administration costs.

Signing of the contract – We strongly advise you have a thorough read of the contract before signing as it is legally binding.Handing over the house keys from one person to another.

Inventory Check In – An inventory clerk will be scheduled to go to the property & note down the condition prior to occupation. Come the end of your tenancy, a check out clerk will be scheduled to ensure the flat is given back in the same condition it is given to you. This document is vital as it can potentially save you hundreds or thousands of pounds should there be any disputes.

Move in day – The day has finally arrived!! Time to put your feet up, kettle on and enjoy your new home!

Cozy home. Candles, book and cup of tea

Serving Notice for Possession of a Residential Property

Text Eviction Notice typed on retro typewriter

Since the Landlord & Tenant Act 1985 came into force, it is illegal for a landlord to harass or try to force their tenants out of the property without following the correct procedures.

As a Landlord, you may reach a point during the tenancy where you may want to regain possession of your property. This could be due to non-payment of rent, antisocial behaviour,  unauthorised works etc. So can you do, if you need to take possession?

Most properties are let on an Assured Shorthold Tenancy agreement. The most common types of Notice are Section 21 and Section 8. A Landlord can serve a Section 21 Notice without any grounds for possession of the property or a Section 8 Notice with sufficient grounds.

The simplest of Notices is Section 21 under the Housing Act 1988.  This can be enacted so long as the Landlord has followed the correct contractual and legal procedures. Otherwise obtaining possession could become difficult. A Landlord can use this Notice to evict a tenant by either

  1. A) it is after a fixed term tenancy ends, (if there is a written contract)

Or

  1. B) during a tenancy with no fixed date, known as a “Periodic Tenancy”

You cannot use a Section 21 notice if the procedures have not been followed, for example did you know that a tenant must have seen the gas safety certificate, EPC and the Governments Guide on How to Rent Guide. We must also remember that a Section 21 cannot be served within the first 6 months of a tenancy, also if the fixed term has not ended unless there is a break clause in the contract.

There are circumstances where your Section 21 Notice will be invalid. Such as properties that have been served with an Improvement Notice or houses of multiple occupation (HMO’s), without a licence from the council.

You must note that a Section 21 provide the tenant with 2 month’s notice to vacate.

A Section 8 Notice has different grounds which need to be satisfied by the court that have been broken by the tenant. There are mandatory and discretionary grounds. The Notice period varies for each ground.

It is important to notice that in both cases, if the tenant has not vacated upon expiry of the Notice, the Landlord must apply to the court for possession. Unfortunately, it is not as simple as serving a Notice and obtaining possession.

It is always advisable for a landlord to seek legal advice when completing a Section 8 or Section 21 Notice.