Guaranteed rents for landlords: Where's the catch?

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The Independent Online

There is a way in which landlords can get a guaranteed rent for up to five years. There are no agents' fees to pay, no empty periods, and someone else will even sort out tenant problems for you, free of charge. In fact, all that landlords have to do is sit back and watch the money roll in.

Private Sector Leasing Schemes involve leasing your property to a housing association, local authority or other third-party provider, who then sublets it for you for periods of three, four or five years. You get a guaranteed rent, which is set at the outset. Typically, this is slightly below market rates but is paid straight into your bank account, regular as clockwork. In addition, the housing association often handles most, if not all, routine maintenance.

Landlords like the fact that, even though the rent is slightly less, once they factor in the money saved by not paying an agent's fee or maintenance costs, and the time they save, they often end up better off than if letting to private tenants.

And since it is ultimately the Government that is paying the money, there is no chance of default either. So, no trips to court to evict non-paying tenants. And some housing authorities are so keen to get landlords to join, they even pay a signing-on fee for landlords, too.

At the end of the lease period, you get guaranteed vacant possession and the property is cleaned before you resume ownership.

However, most housing associations don't guarantee the state of the carpets and walls, so you may have to do some redecoration .

For landlords already letting to tenants on local housing allowance or housing benefits, these schemes may look particularly attractive. The Government hopes that the new local housing allowance will eventually replace housing benefit. However, with local housing allowance, the money is usually paid to the tenant each month, and landlords complain that all too often it is spent on something other than the rent.

With private sector leasing schemes, there are no such worries. In fact, because the housing association has the lease with the tenant, the landlord need never even meet the latter.

Landlords should note that not all properties are accepted on to the scheme. Houses in multiple occupation and studio flats are usually excluded. Most housing authorities want accommodation for singles, couples or small families, so are after one- or two-bedroom flats or houses. Others are short of larger properties for bigger families.

Landlords interested in the scheme shouldn't assume that any old property will do. It won't. Usually, the housing association's surveyor inspects the property to ensure it meets requirements. They all want to see satisfactory electrical and gas safety checks, smoke detectors, locks on all windows and fire-resistant doors to kitchens.

So, what's the catch? There are a few possible drawbacks to consider. First, you will have no control over the people that the housing association puts in. As some of these may be vulnerable and have social problems, this could become an issue, especially if your place is on a posh estate. And while the housing associations are good at dealing with any antisocial type problems, your neighbours may be less tolerant.

Second, you'll need to check that the head lease, insurer and mortgage lender will allow leases of this type. Most will but some won't (though lenders' concerns can often be allayed by the housing association).

Third, as you'll have to give over your property for the period of the lease, you'll have to forget about selling during that time.

David Lawrenson runs seminars and a consultancy on buy to let: www.lettingfocus.com. He is the author of 'Successful Property Letting - How to Make Money in Buy to Let'

Find out more

* If you are interested in going on to a scheme, contact your local authority or housing associations. The property company Orchard & Shipman also runs a scheme in Edinburgh.

* To find out who to speak to, key in "private sector lease scheme" and the name of your area into a computer search engine.

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