Wednesday, 31 January 2018 10:28

Short term lets - Godsend or Disaster?

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Short term lets - Godsend or Disaster?

Ever since the 1st of the new aircraft carriers arrived in Portsmouth we have seen a huge upswing in requests for accommodation for contractors working on the carriers or related infrastructure. Much of this has been very positive for our members but there have been instances where issues have arisen.

It has also led to debates about what sort of contract should be used and how they can be enforced, whether properties are HMO’s and need to be licensed, etc. On the one hand we have had requests for 40 or 50 rooms for 6 months which have proved good for some landlords and on the other, we have examples of a similar number of rooms taken for the same period and then vacated after 3 months with payments stopped. In both examples we are faced with people looking for serviced accommodation at long term unfurnished let rates which is just not possible.

What can we do to minimise the risks?....

One of the issues in this space is the legal one of how you contract – if the worker is moving to Portsmouth for 6 months and wants a room or lodgings for that period, then an AST is the way to go with all of the associated safeguards for both parties. But if the worker is coming here for 6 months but still has a main home somewhere else and is perhaps, going home at weekends, is an AST appropriate? And if it is not, what is?

The likes of Airbnb have good ‘holiday let’ contracts that will work – but typically there is a 90-day maximum stay.

And when you have expensively furnished ‘serviced accommodation’ and an agency looking to bulk buy lodgings at significant discount, should you trade the benefits of a longer let against the reduced income per night that this will bring if you accept the deal offered?

Time for an example:  PDPLA member, Chris Sheen, MD of Imuvelettings, said:

“Fife Digs a company from Scotland came to me in late August 17 looking to house 100 workers for the Queen Elizabeth aircraft carrier in Portsmouth Dockyard.

They let 10 houses starting in August 17, they paid the first three month and told me at the start of Jan 18 that they have not been paid by the contractors and that the contractors have now moved back to Scotland, and that they will be ending the contracts. Since then they have moved out, left keys in the houses and made no further payments, although they were sub –letting the house for nearly double the monthly rent to the contractors.  

They are extremely unprofessional with no morals and have left myself and 10 of my landlords in a terrible situation and with a large financial loss. Please inform all the Southsea landlords if approached not to deal with them, they are conmen!”

Whether Fife are conmen, just unprofessional or equally out of pocket as the company that recruited them reneged on their agreement, this is a perfect example of the sort of risks we all face, whether it be a normal let or a short term let as in this case.

What can we do to reduce the risk?

  • Approach sub-letting  with caution and do your due diligence. If you have a relationship with a business that has taken on your property for a fixed amount of time for a fixed price with the appropriate company let contract in place, that can work. This is how many Serviced Accommodation units are sourced and also, how many charities provide accommodation for those who need support. However, the non-contractual sub-letting where you have no idea who your actual tenants are and no corporate contract to cover the risks is to be avoided. As soon as you lose the direct relationship between yourself and the person living in your house, your ability to seek legal redress is weakened. Obviously, there are cases where you have no choice, but if you have to, seek a company guarantee or a private individual one. It may not help, but at least you then have a better case if you ever go to court.
  • If you have serviced accommodation and it is correctly priced (ie voids are low or in the expected range) don’t do reduced rate deals for a longer term unless you offer the lower rate later in the period or you have contractual certainty that they will stay the full term, as some unscrupulous agencies will ask for a 6 month price knowing they only need it for 3 months, as a means of getting a cheap rate for the shorter term let, knowing that most will not go to court for the additional couple of months. As member and blogger Charlotte puts it so eloquently don’t offer lemonade prices for champagne accommodation.
  • Always reference any longer term tenants or agencies that you use and get guarantors where appropriate
  • A short AST is fine, but only if it is with the people staying in the property. A Company let needs to be used with a Company such as Fife if they are selecting the residents.
  • A holiday let agreement is fine for any length stay as long as it is not the residents main home, and they do not have exclusive possession i.e. you go in for servicing and cleaning without notice.
  • If you are unsure of how best to contract to reduce risk, do call the RLA Helpline and get advice. It is free and may be the difference between a good and a bad experience.
  • Any additional costs (e.g. full furnishing/equipping, cost of linen, laundry, bills and cleaning) are recouped in full in the first term of the tenancy e.g. a 6 month let with additional setup costs of £3000 needs to be charged out at an extra £500/month plus cleaning/linen charge so rent would go from £1000 to £1500 for a 3-bed in this example.
  • If they only commit for 3 months then charge accordingly e.g. £2000 /month for the same property. Furnishers typically charge 15% of the goods’ purchase price for doing the shopping and staging. After all, you are furnishing it to their spec. Add on a cleaning and linen charge of £100/week and you are approaching the right figure of £2000-£2400 per month all inclusive.
  •  A commercially viable SA of the same property (by the night) should return at least £3000/month to compensate for the extra work involved in bookings/meet and greets/VAT etc. SO you need to charge SA rate minus 20%.
  • If you suspect anything fishy, demand the full 6 month rent up front. SA always charges up-front.
  • Be mindful of the leaving date, do you want empty property in November?
Last modified on Thursday, 01 February 2018 10:45

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