Propertymark says that it fully supports the National Trading Standards Estate and Lettings Agency Team’s review into the impact of Rent-to-Rent, which is intended to raise standards for how it is used in the private rented sector.
The National Trading Standards Estate and Lettings Agency Team, which is the main policing body for the Estate Agents Act 1979 and the Tenant Fees Act 2019, started a consultation that began in January, and finished in March, to seek opinions on how Rent-to-Rent and Guaranteed Rent schemes work in the private rented sector.
There are many alternative Rent-to-Rent models such as turning family homes into Houses in Multiple Occupation (HMOs), which are commonly used by student landlords, and short-term lets where the property in question is operated on a short-term basis, such as for holiday makers.
Other Rent-to-Rent models include local authorities agreeing to enter into a Rent-to-Rent agreement to boost their housing stock to stop homelessness, and sub-letting agreements like the ones used for social housing.
Propertymark shared some concerns about Rent-to-Rent, which include a lack of clarity over expectations and responsibilities from both the ‘superior landlord’ and Rent-to-Rent operator, due to the under-regulation and lack of standards within these schemes. This results in incidents whereby maintenance obligations are left uncompleted by both parties.
Another concern the professional body had was that landlords who lack knowledge regarding their responsibilities to tenants could be persuaded to join this kind of scheme, as they could be convinced they can earn a ‘passive income’ from guaranteed rent. Therefore, the initiative can pave the way for more rouge landlords who have no interest in maintaining their property. Many people can therefore enter the sector for the wrong reasons or have the wrong impression about how easy it is to rent a property.
Therefore, the professional body proposes that to improve the Rent-to-Rent initiative, there must be apparent expectations before the ‘superior landlord’ and Rent-to-Rent operator sign a contract, such as the awareness that the ‘superior landlord’ has no control over any tenants that sign up to reside in their property.
Propertymark also suggested that a letting agent can collaborate alongside inexperienced ‘superior landlords’ and Rent-to-Rent operators to guarantee they comprehend their duties to each other and to tenants.
Also, the professional body stated that Rent-to-Rent schemes must be regulated to stop abuse of the initiative, such as signing up to a deposit protection scheme, establishing client money protection, independent redress, and a requirement to meet housing standards alongside the introduction of the Decent Homes Standard.
Nathan Emerson, CEO at Propertymark, said: “Many Propertymark members have had positive experiences with Rent-to-Rent operators, though there are still some outstanding issues about the practice despite it being a potential opportunity for agents to expand their business in innovative ways.
“However, Rent-to-Rent schemes are often advertised as enabling people to earn a passive income with little effort, which could lead to many people entering this sector with the wrong expectations about how simple it is to rent a property.
“Additionally, the lack of regulations over these kinds of schemes make them vulnerable to bad actors, who have in some cases rented property to criminals.Propertymark is keen to work with the National Trading Standards Estate and Lettings Agency Team to raise standards and expectations of how Rent-to-Rent works in practice.”
Quite simply the answer should be no.
At what point does it REALLY make sense for a dual layer of rental to exist. At each stage there are fees and profit margins to consider that make the end rent figure stupidly high in comparison to the asset value.
It is a Ponzi scheme and nobody is winning except the people taking a fee.
There are so many things that exist solely on paper to allow a middleman (or woman) to extract their pound of flesh from a normal transaction that I truly despair! Simple common sense states that this type of transaction should be banned.
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This is really positive new for our sector.
Much of my consumer protection work in the “wealth creation” industry is hearing from people who have been stung financially in connection with Rent to Rent.
I recently wrote to GumTree and OpenRent to try and persaude them to put warnings for landlords on their platforms and OpenRent positively engaged with me. I did not hear back from GumTree.
I was recently invited to contribute to the current government Rent to Rent consultation, and I am copying my reply below as I think it covers all my concerns:
My name is Vanessa Warwick and I believe I am one of the people recommended by Paul Shamplina to take part in the Rent to Rent consultation.
I have been a landlord since 1992 and a portfolio landlord since 2004 and I also co-founded Propertytribes.com , which is one of the UK’s leading landlord forums, focussing on educating landlords through shared knowledge and opinion to create a better experience for all involved in the PRS – especially tenants – as educated landlords make for better and more responsible landlords.
I have been involved in creating content to protect consumers for over a decade now and, for my trouble, I am facing the biggest ever defamation damages brought in the history of the UK courts – £6.4 million – for fact checking notorious property guru Samuel Leeds, including some comments he made about how easy it is to get into Rent to Rent without any money and how easy it is to make money!
Due to the wealth of these property trainers, most media outlets are too fearful of defamation claims to allow any public interest commentary, therefore, I am pretty much alone in trying to protect consumers and I believe that has got to change.
The Guardian reported on my SL case in an article that you can search on.
I believe Rent to Rent is a risk to consumers in four ways:
1. Landlords – Rent not passed on to landlord / potential HMO being created / not knowing who’s in the property / Rent to Renter not in any position to “guarantee” the rent.
2. Tenants – Many tenants are exploited by Rent to Renters and are highly vulnerable to this as many of them do not know their consumer rights. Some examples: Rent to Renter keeping the rent and not passing on the money to the landlord (I’ve heard many cases of this happening), so tenant ends up losing their home. Charging tenants for “taking the room”. For example, XXXXX XXXX charged each tenant £150.00 just for “taking the room” – which obviously goes against the Tenant Fee Act. Deposits not being protected and the tenants unable to get them back.
3. Students who sign up for expensive Rent to Rent training courses – They are told they don’t need any money to undertake this and they are advised to avoid lettings agents and go direct to landlords via portals like Gumtree and OpenRent and also to use the HMO Register as a marketing list. People are paying several thousands of pounds for these training courses and it is very likely they will not be able to implement the strategy, and, if they do, a high proportion of them fail at it and end up causing financial loss because they are not in any kind of financial position to guarantee the rent, and nor are they compliant, and nor are they experienced property managers.
There are those who think they are going to be a millionaire in a year with no money (as promised by property gurus) and then there are those who are simply fraudsters and realise that they can get the tenants to pay them money and not pass it on to the landlord. They keep that going as long as possible and then disappear and there are few routes of redress for anyone involved.
4. Investors – who experience financial loss at the hands of Rent to Rent and Rent to Rent Serviced Accommodation deal sourcers – These people are also fresh off a guru course having paid thousands to learn how to be a R2R deal sourcer and they are not experienced enough to introduce “investors” to deals. Things have a high propensity to turn very sour. XXXXX XXXX, for instance, charged investors £6K to find them a deal and refurbish a property and set it up as a Rent to Rent arrangement – promising the investor £500.00 per month net profit. If you think about it, it would take 12 months of full occupancy just for the investor to recoup there initial outlay! Then there is the insanity of paying to refurbish an asset that you don’t actually own.
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