Tuesday, September 13, 2011

Landlords have lessons to learn about renting to students | The Post

Over the next few days, landlords and third-level students will shake hands in their thousands and swap large deposits for front-door keys, before the nation’s colleges and universities re-open later this month.

More than 250,000 students will begin or resume their studies at 40 colleges nationwide and more than 80,000 college-goers will spend the coming academic term living in private rented accommodation. But are landlords getting the best value for money and protecting their valuable investment in a sector where they are often painted as villains fleecing hapless and innocent students?

For John Leahy, a Dublin-based landlord and founder of the Irishlandlord.com website, last week’s protests by the Union of Students in Ireland (USI) about ‘rogue landlords’ unfairly withholding deposits was both predictable and disappointing.

‘‘In fact, if you look at the hard facts, according to PRTB [Private Residential Tenancies Board] data, in 60 per cent of cases where a dispute has arisen, the PRTB has decided that the landlord was correct to retain some or all of the deposit," he said.

Leahy is busier at this time of year, due to what he called the ‘‘seasonal and proportionate’’ number of issues which arose as landlords and students prepared to sign leases.

Excluding the summer months, the student rental market represents roughly a third of the total private rented housing market, and problems arise mostly at the beginning and end of this nine-month period.

‘‘There is a core of key concerns [among landlords]," said Leahy. His website offering advice and a forum for discussion among landlords gets 40,000 visits per month.

‘‘Firstly, for landlords who are thinking of renting to first-year students who have never previously lived outside the family home, it’s important to properly assess the risks associated with renting to this group," he said. While some first year students will cause no hassle for their landlords, others may cause their landlords considerable headaches.

‘‘Some first-year students will make new friends and decide midway through the college year that they would like to share with someone else; or they will drop out of the course or they will simply fall out with their fellow tenants and want to move elsewhere," he said.

‘‘What is important for a landlord to explain from the very start is that under the terms of a contract, each tenant is both jointly and separately liable for the rent. It is not okay to say to a landlord, ‘Well, Mary has left so now we’re only going to pay three-quarters of the rent’," he said.

Maura O’Neill, accommodation and student activities officer at UCC, said that first-year students may be better off living in ‘‘structured accommodation’’.

‘‘For first-year college students, I advise parents and students that it may be best to live in digs with a family or to live in a student complex, for the first year at least," she said. Leahy said that many landlords would perceive first years to be ‘‘higher risk’’.

‘‘Generally speaking, those who are further into their time at college tend to have settled down a bit; the novelty of being away from home and the freedom that that entails has worn off," he said. He advised landlords to always insist upon a parental first year student to remove the greater risk of them moving out and being left without a tenant and an income.

Another problem which arises is the signing of 12month leases.

‘‘If a student signs a 12-month lease (as opposed to one limited to the college period agreed with the landlord) it is important that they know they remain liable to pay this when the college closes," Leahy said.

‘‘It is equally important that students are aware of their obligations under the Residential Tenancy Act 2004, as are landlords," said Leahy.

For any first-time landlords considering entering the fray as colleges re-open, Thurles-based solicitor Neil JButler advised prospective landlords that they should examine the tax implications of renting a property before deciding to enter the sector ‘‘both from an income tax perspective and also as to whether, by renting the property, you run the potential of losing any capital gains tax exemption that may apply to it’’.

‘‘In all situations of letting property, it is important that your insurance company or broker be advised as to the fact of the letting. This again will minimise the potential for the insurer to decline cover in the event of any claim," Butler said. O’Neill agreed that it was vital for both tenant and landlord to know what they were getting themselves into when agreeing to a lease.

O’Neill’s office has a service level agreement (SLA) with all of the landlords who agree to provide accommodation to the 4,500 students on their books.

Other colleges have established comparable structures or are moving in that direction.

In UCC’s case, they have SLAs covering landlords and rental agencies renting 1,600 houses; 100 ‘‘digs ladies’’; and several dozen student accommodation complexes run either by the college itself or by private providers.

‘‘In addition to requesting that all statutory requirements are met, our service level agreements set maximum rent levels; they also stipulate that all complexes operate to the same set of house rules; and that students who go into digs have clear guidance on what to expect in terms of meals and so forth," O’Neill said.

The college also provides quarterly newsletters to landlords with whom they have an SLA, in which they outline any developments in the sector. They also give out free training and a downloadable list of good management practices.

‘‘Last year there was a big issue with the recall of some products due to the risk of carbon monoxide poisoning, so that is an important update for landlords to have," O’Neill said.

On the thorny issue of disputes between landlords and tenants, O’Neill said that the college had gone to the PRTB to speak up on behalf of both landlords and tenants. ‘‘Most landlords are very good and most students never cause any problems, but unfortunately there’s a very small number of landlords who have bad management practices, and there’s a similarly small number of students who cause no small amount of trouble. We devote a lot of time to these small amounts of people," O’Neill said.

The biggest sticking point between landlords and tenants tends to be the non-return of deposits, where the landlord believes that the student has damaged property or caused more than a fair amount of wear and tear.

‘‘There’s a wonderful tool for landlords now, called the digital camera," said O’Neill. She cited the example of a landlady who had a difficulty with a student after the youngster ‘‘threw a party at which he tore a radiator off the wall of an upstairs room and then just left it there’’. In the end the student paid a considerable sum for both the repair and associated damage caused.

Although it was a major nuisance for the landlady, she had photographic evidence to show that when she rented out the house the radiator was unambiguously affixed to the wall.

Despite photographs being taken, students and landlords will dispute what constitutes ‘fair wear and tear’. Leahy said he had heard of one case where a student punched a hole in a wall during a party and claimed that it constituted ‘‘fair wear and tear’’.

O’Neill also advised landlords to take a utility deposit. ‘‘Arguments over paying for utilities, gas and electricity are often at the heart of many rows, not just between landlords and tenants, but between the tenants themselves," she said.

In the past many landlords transferred the utility accounts into the names of the students and expected them to pay the bill. Worse case scenario, landlords can be stung if the student refuses to pay a bill.

This problem is reduced if the landlord insists on a ‘utility deposit’ being paid upfront and then proceeds to invoice the students for the utility costs as they arise. If they refuse to pay a bill incurred during their stay, then they could forgo some or all of the deposit, she said.

O’Neill’s office used to deal with as many as eight or nine new disputes every week between landlords and tenants over the issue of unpaid utility bills. Last year she had just two disputes for the whole academic period as more landlords insisted on a utility bill being paid upfront.

The other advice which O’Neill gives to landlords renting to students was to ‘‘set up a direct debit for payments. Never deal in cash’’. She said cash was difficult to trace and could be difficult for a landlord to prove the transaction had occurred.

Disputes are not limited to landlords and tenants. Neighbours living beside student rented accommodation could easily find things to get upset about, and often it was something which could be sorted out with common sense, O’Neill said.

Noise-related issues and the appearance of a rented property are two of the big issues which neighbours complain about. ‘‘Keeping the front of a property clean and orderly is very important for your neighbours," O’Neill said, who also advised landlords to carry out an intensive round of inspections at the start of any lease. She advised landlords to give their phone number to neighbours and assure them that if there was trouble, they would respond to them. ‘‘I say to landlords; it’s about managing relationships. If neighbours feel they are being listened to and heeded, that’s worth a lot."

Despite the quality of properties improving ‘‘dramatically’’ in the past ten years, O’Neill said she still encountered poor-quality rentals. As recently as last week, she inspected a property which had not been cleaned since its last occupants had vacated some months before. ‘‘The bathroom still had items belonging to the previous tenants and rooms weren’t cleaned," she said.

The economy is causing further difficulties for the market. The student rental market was ‘‘highly fluid and ever-changing’’, according to O’Neill, who said she had noticed that a significantly higher number of first-year students were not entering rented accommodation this year - opting instead to commute from home. She said commuting times were growing as students sought the cheapest accommodation they could find, a voiding the premium which might attach to a property located close to college.

‘‘Price has become a major issue. People do not have the money like they had before, and they’re opting to travel farther to get the best value or to stay at home and get the bus or drive to college," she said. This has led to a decline in demand for digs and for student complexes.

Top ten tips for third-level landlords

1. Get and check written references – if renting to first-time students with no previous renting history, request a written parental guarantee to cover payment of rent and breach of lease terms.

2. Use a good lease agreement that complies with the Residential Tenancies Act 2004.

3. Prepare an inventory of contents that lists, in detail, the contents of the property and the condition they are in at the time of rental. The written inventory should be supported by dated digital photographs.

4. Inspect the property every three months at least. Carry out an intensive period of inspections at the start of the tenancy to iron out initial problems.

5. Provide neighbours living beside your rented property with your contact phone number or email and keep them informed of how you have handled any complaints they have.

6. Keep the exterior of your rental property in good condition and require your tenants to do likewise.

7. Register the tenancy with the Private Residential Tenancies Board. This is a legal requirement. It costs €90 to complete the registration, which must be done within a month of the commencement of the tenancy.

8. Ask your tenants for a utility deposit, some or all of which you can retain if the tenants leave you with outstanding gas or electricity bills; or alternatively install pre-payment meters which means they pay for energy as they use it.

9. Contact colleges close to where your property is located; they may have service level agreements which provide added protection and clarity for you and your tenant if they are a student attending that institution.

10. Avoid dealing in cash; set up monthly or weekly direct debit transactions instead. It is another form of evidence to demonstrate whether an agreed payment has been made or not.

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