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7 Deadliest Landlord Sins

Updated on November 1, 2009

Common errors of judgement can have alarming consequences for landlords who take their eyes off the game. In all the years of renting property for my clients, and myself, these are amongst the most frequent and most expensive mistakes that both novice and experienced buy-to-let property investors tend to make.

Excessive Leniency with Rent Arrears

While there may be the rare occasion when a particularly absent-minded tenant overlooks making a rent payment, most do so because they are in severe financial difficulties. Rent arrears are not generally resolved by a landlord providing their tenant with additional time to make an overdue payment and, in fact, such leniency often just adds to the problem, making the final debt that much bigger. It is always appropriate to offer the tenant a written reminder (within 7 days of a late payment) – but once arrears reach a month overdue, it is time to prepare for more formal action.

There are a variety of professional service providers and agencies that landlords can employ to deal with tenant rent arrears, if they are reluctant to do the job themselves. These all come at a cost – but most of these agencies are efficient, fast acting and skilled in dealing with Housing Act, debt recovery and court procedures.

Ignorance over Harassment and Illegal Eviction Law

Property investors of all ages and from all walks of life – and some with years of time served experience – commonly remain desperately ignorant of the law. Many believe their inappropriate actions in dealing with a bad or non-paying tenant are justified, even when they don’t commit what they perceive as a physical eviction or malicious harassment.

For example, changing the locks of a property without giving the tenant a new set of keys might seem a benign way of dealing with someone who is in severe arrears or one that has repeatedly caused management problems. However, this would still be considered a criminal act of illegal eviction by the courts and the landlord could receive a fine amounting to thousands of pounds and possibly even a prison sentence, if the case went to court.

Landlords need to wake-up to the fact they are involved in a business where their customers (tenants) are highly protected by a wide range of laws and regulations. And as the old adage says, ignorance of the law is no excuse.

Losing Track of Supply and Demand Changes

Some landlords and particularly those in recent years that have become novice buy-to-let investors wrongly believe, having bought a suitable property and rented it out – they can then sit back and just count the money as it comes in. If only life were that simple. In reality, the housing market, tenant demand and rented property supply are constantly changing elements that either enhance or inflict injury on the potential of annual profit. Landlords that think positive dividends received from a property will continue forever without intervention are making a severe and possibly catastrophic error of judgement.

Once fashionable or just simply popular neighbourhoods can swing dramatically when a major employer closes its doors or when a new area of the city receives an influx of regeneration funding. Predicting these changes in advance gives the investor landlord the opportunity to sell up and move on, while remaining blindly ignorant of such changes can result in them having a millstone hanging around their neck.

Tenant demand changes too. In my own city, the local university announced a massive development plan that would result in new and affordable on-campus housing for almost its entire volume of students over a five-year period. Savvy student-let landlords either changed the style of their accommodation to meet the anticipated change in tenant supply – or they sold their properties and invested in other more lucrative properties elsewhere. Those that remained found themselves in a ghettoised benefit-driven neighbourhood with falling house prices and rent levels … and a tenant drought.

Sailing Too Close to a Mortgage Repayment Edge

Buy to let investors sometimes try to overstretch themselves and in doing so run the risk of financial disaster a year or two down the line. Although lenders may well promote the fact that you can borrow such and such an amount – it is not the amount you can borrow that is important, but the amount you are able to repay month on month.

When mortgage repayments are entirely dependent on consistent rental income, investors without an extensive property portfolio would be wise to install a rent guarantee insurance policy into their strategy. Large portfolio investors have the advantage of using other property income to support under performing individual buy-to-let properties, but those with just one or two rented dwellings will suffer a major financial crisis when long voids or rent arrears prevent mortgage repayments being met.

While this may delay problems arising in the short term, it is much better to ensure there is always a wide margin between borrowing and rental income expectations.

Greed and the Lure of Cash

Tenant applicants can be a wily bunch and bad tenants can so easily slip through the net. All landlords should conduct thorough, comprehensive and exhaustive tenant checks. Referencing should include an investigation of their financial history, as well as painting a picture of what their credit and debt commitments are currently like. Adequate employment checking and a credit report are also essential ingredients.

These investigations take time, although by paying an additional premium to a professional referencing agency, results can often be obtained within a few days. For some tenants, even a few days is too long – particularly when they know exactly what the results will be. These applicants will often therefore try to bribe the landlord with cash up front, offering to pay the deposit and first month’s rent there and then in return for a tenancy agreement and keys to the property. They will also offer the most plausible reasons for the necessity of such speed, saying perhaps that they will otherwise be homeless because they have had to leave the family home, due to discord or some other disastrous event.

In this scenario, the kindly landlord takes pity on the applicant and accepts the cash in return for the keys. Later he discovers the upfront cash is all he will ever receive, because the tenant has left a trail of insurmountable debts in his wake and – had referencing been conducted – these facts would have been made abundantly clear.

Buying in Cheap Labour

The landlord owners of certain types of dwelling are renowned for patching-up their properties, rather than procuring a professional repair when required. This tends to later prove uneconomical, as botched maintenance will ultimately let you down – and often at the most inconvenient of times. Moreover, an inefficient repair will have to be redone several times in short sequence and each time it’s done, it costs money. It therefore makes far more sense to have any repair or maintenance conducted properly and professionally in the first place.

There are also some types of maintenance where landlords must by law employ professional people to ensure installations are undertaken safely. These include all kinds of electrical work, whether it is something relatively simple like installing a spurred socket or something more involved, such as a complete property rewire. The same applies to any work involving gas appliances and their associated pipework. Failure to employ registered engineers in the latter circumstances can have serious and costly ramifications, if a problem ensues.

Taking Tenants for Granted

Respectful and prompt paying tenants are hard to come by, so it’s extremely important to retain them. Landlords occasionally make the mistake of treating good tenants the same as any others, without truly recognising their value over time. For example, during periods when tenant supply is low or when local competition amongst landlords is high, it would be foolhardy to inflict a rent increase beyond the current local level.

Good tenants may simply look elsewhere for a cheaper alternative, resulting in the loss of at least one month’s rent while alternative tenants are found. In such circumstances, it would be better to undertake comprehensive research about local rent levels and assess the quality and volume of accommodation available in comparison to your own. Then, and only if comparables suggest a rent increase is appropriate, consult your tenants to find out how an increase might be received.

It is equally important to offer all tenants (but particularly good ones) a fast and reliable maintenance and repair service. If tenants feel you take notice of what they say and deal with repairs quickly, they are much more likely to renew the tenancy when the time comes.

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    • internpete profile image

      Peter V 

      6 years ago from At the Beach in Florida

      I know a few Landlords who should take a look at this list! Great Hub!

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