Updating post from Reddit.
As the title - atm I can't think of many downsides.
The council find the tenants and guarantee the rent. Perhaps there will be an element that the property is more likely to be trashed at the end of the tenancy but that's always a risk.
Is there anyone here that has a set up like this with the council?
What has been your experience?
For clarity, the AST would be with the tenant directly, I protect the deposit etc. The council guarantees the rent on a side contract with me. This is not r2r territory.
The downsides are they usually put unscrupulous people in these properties. Yes you might get guaranteed rent, you will also get a guaranteed fucked up house and you will spoil life for the neighbours.
It's a shitty thing to do.
Not only this they will only pay today's market value they dont this they cover if you want to up the rent, also they usually only agree 3 years or some fixed period then after that they expect the tenants to be on their feet again and take over. Remember that most of these (not all) will be people that struggled before the council stepped in so chances are they will still be struggling in 3 years.
No. The agreement is with the council. At the end of the contract the OP will get their property back vacant.
The tenants may have been struggling due to domestic violence and needed to flee from somewhere else to be safe or they may have struggled due to a shitty landlord not carrying out necessary repairs making their previous home uninhabitable or a greedy landlord using the tenant as a cash cow. In other words lots of reasons unrelated to how they would care for the home.
This is not how the scheme works in my area the council tenant becomes the landlords problem after the councils term ends so landlords don't get a vacant property back. https://www.coventry.gov.uk/lets-rent-coventry-1/lets-rent-coventry/3
The issue is that rent reform on the horizon will make it far more problematic as technically there will not be fixed rate periods so the council won't be able to continue saying the periods are fixed for 24months etc. to my understanding.
This is not correct. The council is just a simple guarantor for the rent.
Will the council handle the damages as well?
This. The damages could be huge you have zero control over who lives there or what they do they could literally sell your kitchen and all you have is guaranteed rent they are probably unemployed so no deposit no recourse through the courts etc…
Council fixes it dude. Been through this.
The agreement is with the council. It is the council who are carrying the risk.
That’s not what the post says. They guarantee rent not repairs. Hence my post. If they don’t guarantee repairs and take full liability run a mile.
Thanks, I will ask re repairs for excessive damage/theft that the deposit wouldn't cover
There is much more on top of that, potential civil/ criminal legal charges, say they turn the property into a weed farm and hack the meter, 3 party liability,like they damages the communal area.
Furthermore stuff that is hard to quantify like property prices dropping.
The liability always depends on what you have signed and whether the clause is lawful.
Assuming something is going to be happened is very dangerous in practice.
The AST is with the tenant. Council only guarantees the rent.
I would ensure that the rent is paid directly to the landlord by the Council though! Otherwise there's no guarantee it makes it via the tenant, and then you might as well find your own tenant and vet carefully!
Will the council evict the tenant after the agreement ends? Or just leave you with someone with no job, no income and have to figure it out yourself.
This happened to someone on my network - council made an upfront ex gratia payment as an inducement. The damages after a few years were 10x that amount and everything that could be stolen was.
On the other hand, feckless people and thieves and robbers have to be housed somewhere.
Woah so the people who come to live in the property might not be ideal tenants
It looks good on paper but I would never do it again. Had it on two properties and both of them at the end I had to take legal action to get the property back. So that’s a couple thousand pounds and 18 months. In that period rents had increased but they wouldn’t match “market” without another 3 years. To be honest you have to think how much government hates landlords in hindsight. It was always going to be an abusive relationship and they hold all the power. I’d never do it again.
THanks - this is the real life experience I needed to hear about. Will continue my search for reference passing tenants!
I’d avoid - they tricked me, promise you the world but then when they have to stand by their agreement they use every trick in the book to avoid responsibility, finally they cancelled their contract and handed me their shitshow back, including their sub-prime tenants they lost an eviction hearing with, as it was in local tax payers benefit !
Now my problem of their making.
Says all you need to know.
All about the risk really. Government has put landlords into a very difficult position. First issue is whether your insurance and mortgage (if you have one) permit this? If so, get their approval in writing. Secondly, the Council is only acting as a rent guarantor here. Does that extend to further liabilities in case of damage etc exceeding any deposit? Lastly, if the rate of rent is only market rent, then that would suggest that you are able to find other tenants who are self funding and meet normal guarantor criteria at the level of rent asked, and at much lower normal risk profile.
Thanks, I have already asked about how the rent guarantee works with the usual rent increases as will be a normal AST between myself and the tenant. I've got a bunch of viewings over the weekend and still have 4 weeks till property is vacant so no urgency at the moment, just wondering if to even consider it as an option
Even if your insurance and mortgage permitting that initially, they probably could waive their liability in case the tenant did something illegal.
I'm on a mixed leasehold/tenant council estate. Some of the council tenants are great, some smoke weed all day and deal from their house. It's luck which ones you get
So true, and the risk in this case is that IF the tenants are bad, the landlord could be left significantly out of pocket, which means another less property available for the good tenants
If you want to kick the tenants out the first thing the council says to them is 'dont move wait to be evicted'
That’s true whether renting on this scheme or just a typical let
If the person has nowhere to go then yes, often people choose to find another place.
A council placed tenant is not going to have anywhere else to go
It entirely depends on what the LA are looking at, many are now employing people to improve discharges of homelessness duties to the private sector.
Some authorities will guarantee rent and also support the tenants in the placement and some won’t. And whilst many have a negative view of homelessness cases I would caution people to think logically. Not every homeless household is a drug addict, or rough sleeper or a nightmare person.
In fact where I work the opposite is true the vast majority of homeless cases are normal people from Normal households who are struggling to find somewhere to live that’s affordable. Many approach the council for the dream of social housing at a much lower rent level.
Regardless the rules for you are the same weather you take tenants from the council or an agent, truth is you never know who your going to get.
I do agree with this but unfortunately there will always be the few bad apples that spoil the whole crate. I'm having to turn away so many single parents on £30 - 35k cause affordability is £40k+. I don't know where these people are supposed to be housed?
Thing is there was an article the other day that people on 30-35k will get help for FTB mortgages. So if they can afford mortgages why can’t they afford rent?
Sometimes the PRS sets the barrier too high IMO.
There will always be bad apples, but that’s true no matter where you source your tenants from. To know if the LA offer is worth it, requires a much more in depth look of what they are offering beyond just the rent aspect.
They should not be single is the hard truth. Co-living with other parents should be an option.
Oh yes there are downsides although yours seems different from mine where I deliberately have no interaction with the tenants. I’ve been doing this with a ex-council flat for 13 years and it has been lucrative.
Market rate is up to interpretation but my place was paid off so the ROI is excellent for me.
I was thankful the council accepted the property because I could not rent it privately and selling is hard because it is in a bad estate. If I could have rented privately I would have.
The council will make sure the property is up to current regulations, this is not bad but you will be given 30 days to “fix” something that was not broken went you entered the lease, this is normally on renewal so you need to make sure you have cash reserves. For me last renewal it was a compliant linked fire-alarm system that cost £1k. Or one month’s rent. I plan for this as part of general maintenance but you need to be ready for it.
They will likely mandate British Gas 400 home care or similar which is about £500 a year so that if the tenant has any issue it can be fixed by a 24/7 service. This is abused by tenants causing premiums to grow year on year. Insurance is likely to need £5M public liability cover.
None of there are showstoppers and you may argue should be for any rental but the quality of tenants is low other wise why are they going through the council. Again, your experience may be different as you seem to be responsible for a deposit for some reason but councils are stretched, they are not doing this because they want to and vetting will be minimal.
I grew up in the council estate where I rent the flat, I know there are good social housing tenants but if the councilare renting from you it is to fill a gap for at-need, homeless families and I have seen the damage that successive families like this have done to my property, I do find it strange the AST is with you,if this means you can vet them yourselves then I would be more positive.
If you have a sturdy home (mine is post war 1955 concrete and brick) with no other options then it is good. If you have any emotional attachment to the property it will be painful.
yes, I'd have final say on the tenants that the council would propose to me. It's a 2006 top (2nd) floor 2 bed flat so in a relatively good condition. I'm going to continue my search for reference passing tenants and keep this council option on the back burner for now
Interesting yours is a different model to mine, I guess you’re getting something like a 8% rental yield? Net?
So nice income but whether you have the sufficient capital behind it to actually mean much in pounds?
You’re definitely on the income side of the property investment, the other side is a capital return.
Now that 8% yield plus the capital return would be very nice, a real gem, but I doubt you would achieve much of a capital return?
It just so turns out that income plus a capital return is about 8%. So some investors go for high yield, and accept no growth, and others low yield and hope for growth. Then others somewhat in between for an average yield and the growth.
Never do it. You and only you should select tenants for your investment. This way you will lose all control.
My experience, don’t get into arrangements with councils when you don’t have to. They are awful to deal with once they have what they want from you. Experience from others I know, they will put in the tenants they cannot house any other way, which is why they have an appealing offer, and after the term, everything is your problem, including the trashed house and trying to remove the tenants, which is also why they are stating the ast will be with the tenants, not the council!
I think it might depend on where your Local Authority (LA) is. I understand there are always going to be bad instances and experiences, which I suppose everyone has it beaten into them that good referencing is so important, but even after that things can still go wrong.
Okay, contractually they aren't guaranteeing the rent themselves - if they were paying the rent themselves this would be a lease and they'd be part of the contract and also liable for damages etc. What is likely occurring is to discharge a Main Housing Duty the Officer needs to be statutorily satisfied the property is affordable; this is usually done by paying the first month rent (and deposit), paying the difference between the LHA rate in advance for the initial fixed term of the tenancy, and instructing an APA (Alternative Payment Arrangement) to the DWP as Homelessness is one of the few enforced APAs you can get these days. This effectively guarantees the rent but not in the contractual way because not a penny of rent is touching the tenant's bank account. What I do know though is referencing companies pass this because all they're doing is making sure the rent is paid over the initial fixed term. Sometimes a LA will also pay for an insurance backed product too. Rent Guarantor, for example.
The thing is when discharging a Main Housing Duty, if the household re-applies as homeless within the first 24 months they're immediately owed a new Main Housing Duty; therefore any half-decent LA will then re-evaluate and re-qualify the household around month 11 to ensure onward affordability.
Going back to my point about where the LA is - where I am (and for full disclosure, where I work) Part 7 discharges are working well, and successfully. We have Tenancy Sustainment Officers, Call Before You Serve, Landlord Advice and Best Practice Teams - most (granted, not all) households we're supporting (at least at Main Duty) have been through some form of crisis, and because I involve my landlords throughout the process and include them in the final say of whom is incepted and am personally mindful of that person's own attitude to risk these households are doing well because they want the opportunity to go on and be the best versions of themselves. The only real risk in my cases are when that actually happens, the UC claim is reduced due to employment, and then the tenant elects to not pay that shortfall themselves. Tenants that are intentionally homeless do not get owed a Main Housing Duty so clients (here at least) generally aren't interested in stepping over that line.
I do believe central government are putting landlords into a difficult position, but I also believe that at local level, councils are also having to deal with this realistically and objectively, and I'm getting the best traction working with my network of agents and landlords to get positive outcomes for everyone.
Thanks, this is the detail I was after. Given the RRB will make contracts 6m then periodic how would that affect how the guarantee only covers the initial fixed term?
We’re still working to initial periods, as I expect referencing companies will too otherwise they’d have nothing tangible to base their policy against. Again, the Homeless Reduction Act requires 24 months of tenure to fully discharge the duty owed; it would be crazy for a LA. It to support that in happening.
These are people the council want to get off their lists. Expect anti social behaviour, bills not paid. The council take years to pay for any damage if you are lucky
So the council is just a simple guarantor. Because otherwise no landlord would rent to the tenants as they are being put into accommodation that they cannot afford.
You just need to make sure that the contract with the council protects your interests, so don’t just trust council because it’s the council it will be looking after their own interest. You need to make sure you get your contract looked over by your solicitor and that you truly understand the risks because I should say of the tenants trash the property council are not going to guarantee any work as you have the deposit claim on, so good luck with that.
When I did this 16 years ago, it was a tripartite contract with the tenant, the council, and the landlord for 2 years until the deposit was repaid.
A scheme where the landlord chooses the tenant is best - not all social tenants are the same.
I still have this tenant - she has had stability to raise her children and I coveted the mortgage.
No need for that, it's your mortgage 😃
Is it under the PSL ((Private Sector Leasing Scheme). I have a property under the scheme and the council has been very good. Make sure you read the contract thoroughly because it will detail liabilities etc. A few things to be wary of.. You will need to find a mortgage and Buildings insurance that covers this kind of Agreement. I haven't had many issues with mortgages but on my last renewal the most competitive one was ruled out. Buildings insurance is a bigger challenge. The only reasonable company I've found to cover it is Salvation Army, but they are still more expensive than average. Just also bear in mind that the tenants will not respect the property. I had a tenant cut down/remove an entire established privet hedge, paint walls garish colours and even pain the grout between kitchen tiles black.
Edit: I just read your comment again.. my brother does the scheme you are talking about and has far more problems than I do because of direct contact with tenants. I'd recommend you ask the council about PSL
The PSL scheme is £300pm short of market rent which is why I initially ignored the person from the council that contacted me
It is less than the market rate but it is fully managed by the council. The equivalent fully managed let by an estate agent in my area is around 15%. My PSL also guarantees monthly income and they pay most repairs. So it stacks up in my case as a hands off LL.
If you care about just getting money, then go for it but it carries a higher risk.
Don’t do it! I foolishly did this had council tenants for 5 years. When I needed the property back the council after giving the relevant notices the council told the tenants to stay put until the bailiffs come to remove them. It took a year to get the property back & the state of the place was horrendous. If you want peace of mind sell or go private. It’s not even worth renting to be honest. A building worth 300K & only yield 12K-21K a year is terrible business. Renting is not as great as people think & with all the government scrutinising landlords it’s not worth all the hassle. There’s much better ways to make more money. Property is definitely not one of them
The rent guarantee is attractive but the potential tenant may negate this in ways that would make you regret such a move.
So you get your money every month, but at what cost to the property, the neighbours and possibly/probably your bank account at the end of the tenancy?
Do more research majority of landlords I've seen run a mile from that situation with local councils
These are people that can't find housing anywhere, lifelong wasters, good for nothings, they may be fine, but I reckon your risk of ruin in higher with these people.
You will not be able to choose the tenants, and will never be able to evict...
Don’t do it.
Would you like living next to a drug dealer, domestic abuse victim ( whose partner keeps turning up and smashing the windows ) or recently released prisoner.
A house I went in to the council had filled it with ex cons ( three of them ) and they all looked dodgy as heck.
who sets the rent?
I did one of these and at 1st it was great a little under market but over the years private rent shot up and council rent stayed the same.. huge opportunity cost.
council only protected 1st £1500 of damages, about to spend £12,500 on a refub after a 5 year lock in as flat in a terrible state!
You will devalue to street and attract similar people.
So I was living in the rent guarantee scheme just a couple months ago. They don’t pay it at market rate, they pay it at the LHA. You’re guaranteed the rent and you can ask that it only be people who work, that’s how many landlord had done it. So I lived in a building with other ‘council’ tenants but you could only live there if you were working full time.
They also covered the cost of all repairs and they pay you the deposit etc.
I would say: run away from councils. My mates parents bought a house, renovated it (London area). Council approached them and offered rent guarantees and nice tenant…(right). So tenants were a “single mom” of 2. On month 2 when LL didn’t receive rent, it appeared that council have to pay tbe tenants rent and tenant then supposed to pay LL - that didn’t happen. Upon polite approach to the tenant, she started playing the gane of begging for extra 2-3 weeks and she will payd all in full. Plus, LL found a man and 2 big dogs living with Tenant which was against the contract, on what tenant said, well she didn’t care coz they have to live somewhere. She said she had to hide the fact she has dogs coz nobody wanted to rent tnem (no surprise). Councik told LLs if they are not happy they have to take tenants to court and legally kick them out and council cannot do anything. It took them abother 4-5 months to finally obtain court decision and when they came to access property they found everything in the hoyse to be either stolen or intentionally broken, all walls and ceiling covered in dog fieces and council did NOTHING to help them. Cost them 20+ k to renovate. Still council had audacity to approach them again after renovations and “sweared” to endure this wont happen again. And my mates parents fell for that too. And they were given 6 months upfront rent. After several month police called them to attend property, and what do you know, “amazing (they all Are) tenant” had a built weed farm and ran away. And huge electricity bills…became LLs liability yet again. Plus for some time they didn’t have access and again it cost them money to refurb house. After all that, they sweared to never deal with council tenants ever again. That was a story for me to never do that either.
Some years ago now I had a London council reach out to me with a similar deal (for a property outside London). They guaranteed rent for 5 years and would cover all ‘non-structural’ issues.
When speaking with the council and digging through the scenarios it turned out what they considered to be structural was extensive such as damp, boiler issues, blown plaster, carpets etc. If something occurred which needed work they would do it and deduct it from the rent if they felt it was a cost I should have beared (with no consult on costs, need for work or the like).
Also, after the 5 years I would inherit the tenant or would have to evict them. Either way they would thoroughly wash their hands of the tenant.
In short, it became clear they were going to shove some terrible tenant with me, argue the odds about maintenance (likely charging me for most of it) and at the end of it I’ll likely have a tenant who refuses to pay and continues to trash the place.
The deal only seems so generous as the council have to house certain people and realise it almost impossible with someone who simply wants to cause as much damage and costs as much money as possible. The council solution is if you can’t beat them join them; so they find a naive LL and offload their problem to them and begin fighting for the tenant until they can claim their settled in a new location and no longer their issue!
Councils should not be even providing private homes to people to begin with. Tax money poorly spent.
I rented my properties through the council on a 5 year lease. Absolutely no end of trouble, they where in touch constantly for repairs and left the houses in a right state- in one house they had painted all the skirting boards different colours and knocked the plaster off a wall to make it a feature. If you can get them to guarantee they’ll do all the repairs and bring it back to the original state then you are good
Yeah they’ll put scumbags that destroy the place in your property…