Despite the government’s best efforts to attract more institutional investors into the residential letting market in order to create a more ‘professional’ private rented sector (PRS), it remains dominated by small, buy-to-let landlords. 

However, there are signs that institutional attitudes are changing, driven not just by the impressive capital gains of residential property across much of the country, but also because there is a growing demand for good quality, rented housing, and the returns are stable and predicted to grow. And it’s not just the private sector which is eying up the opportunity for additional revenue streams; over the last few years, housing associations have been quietly increasing their investment in the PRS, as encouraged by the 2012 Montague Review.   The review noted the potential impact of housing associations on the build-to-rent market:

“The potentially important role of housing associations deserves special mention. Among the larger associations, there is starting to be considerable interest in market rent developments as a natural complement to their existing activities in affordable housing. The associations have the potential to become key players in the development of bespoke private rented schemes, as the balance sheets of at least the strongest among them will support standalone capital raising to finance developments. In addition, their existing affordable housing portfolios give them both asset management expertise and a strong platform to offer a professional service to tenants.”

It has been a slow start but many housing associations are now creating a PRS portfolio.

However, as social housing providers will know, there are significant differences between managing PRS properties and managing social tenancies.  Good tenancy management will maximise income and reduce cost. In this article, we look at how you can achieve that:

Good tenancy management

As a housing association, you will already be good at managing properties but your obligations to private tenants are different and actually less onerous. Your priorities will be to ensure that you have a good tenancy agreement that is capable of enforcement in the event of a breach, and that you have complied with the legislative requirements at the start of the tenancy which will enable you to recover your property easily at the end of the tenancy.  You will also want to have a very tight screening process to ensure that you are taking on suitable tenants. 

What do you want to achieve?  Well, you wish to maximise your income and keep any arrears to a minimum and so it is vital that you act swiftly in the event of a tenancy breach.  You no longer have to help your tenant with housing benefit applications or trip over yourselves to provide support.  The purpose of your foray into this sector is to make money and thus you need to take action without hesitation when arrears start to accrue.  Some key points that will help you:

  • Choose a good letting agent with a proven track record to market your properties and vet your tenants.
  • Consider the use of guarantors but, if you do, ensure that you have a watertight Deed of Guarantee that you can sue on if there is a breach.
  • Ensure that your tenancy agreement is fit for purpose.
  • If you are managing the tenancies yourselves, your policies and procedures should be clear and succinct.
  • If there is a breach, serve notice without delay. You do not have to follow through with proceedings, but have your notice in place ready to go if the breach is not resolved.
  • Use specialist solicitors to serve your notices – they will charge, but you are effectively insuring with them against a defective notice.  If they get it wrong, they will have to reimburse you for any loss.  A defective notice can result in several months of arrears accruing.
  • The same applies for issuing proceedings. Why risk getting it wrong?

One of our largest Registered Provider clients has recently launched its PRS venture. It consulted us in the early stages and we recommended tighter clauses in the tenancy agreement to maximise recovery of costs, and advised on more unusual tenancies such as company lets where the tenancy is a simply contractual agreement and not an assured shorthold tenancy. 

About the author

Dawn Reynolds Partner

Dawn is a lawyer advising on property disputes. She has extensive experience of helping businesses to resolve a broad range of disputes, guiding them through the resolution process, whether that be mediation, arbitration, expert determination, adjudication, tribunal or court proceedings.