Which type of landlord are you?

It is fair to say, in the coming months we are going to see some unprecedented changes in the Private Rental Sector (PRS) and the changes will be coming close together, forcing landlords to make difficult choices over future lettings. We know the demographics indicate a strong rental market over the next 20 years, but how those lettings will be managed will be the challenge for many.

In simple terms, there will be two types of landlord. Existing and new landlords who understand the reason for the changes coming, accept them and build a business model to accommodate the greater regulatory costs, so balancing their yield on the portfolio. There will also be many, particularly those who have been landlords for some time, who will decide that the costs and aggravation – from their point of view – of adhering to the new rules will mean they want to sell their properties and exit the market to find an easier source of income.

New and remaining private landlords will have to strenuously review their costs and this could involve less maintenance, cheaper repair options and comparing letting agent fees (in a recent survey for Kent Reliance around 30% of landlords said they expect to trim their expenditure on agents’ fees).

There are some landlords who don’t have the time, inclination or knowledge of the property market to manage properties themselves, so are happy to pay an agent to do it for them. Similarly, there are some exceptional landlords who totally understand their responsibilities and enjoy managing their properties to a high standard.

Problems could come for those who try to manage everything themselves, not really understanding the depth of knowledge required or the potential fines for not being legally compliant. They could easily find themselves unwittingly in difficult circumstances and facing financial penalties rising from £5,000 for each offence committed.

Similarly, there will be many who try to cut as many costs as possible, especially on agent fees, if they are using one, and the maintenance and repairs; both of which could potentially lead to safety issues for the tenant and non-compliance of the growing list of regulations to comply with.

It is essential that these landlords exercise due diligence in the areas of cost cutting to make sure they instruct the right people for the job required; this way they will be complying with the duties and expectations of the “new landlord” and protecting themselves and their tenants.

For those unsure about which path to take, it would be prudent to speak to a professional who can understand the intended business model and advise accordingly.