Letting your property for the Olympics - a word of caution

Dec. 1, 2011 - PRLog -- We receive numerous enquiries from potential Landlords looking to cash in on the shortage of accommodation for the Olympics. In reality, it’s not just about accommodation – it’s about convenience and proximity to the London venues. Think about it.

I see properties advertised in say East Dulwich for between 4 and 6 times the usual rental price offering a journey time of 40 minutes to Stratford. Rent a property in Southampton, and the journey time is about 2 hours. On a small flat, that’s an extra £4000 you could save yourself for couple more hours of travelling.

Nevertheless, there is an overwhelming attraction for families to go on holiday and rent their homes as the Olympics falls during the school holidays. I am tempted myself – but I can foresee some potential issues.

The taxman will want his share of the landlord’s windfall. If you rent through an agent, he will find out and with the Government short of money, they will be looking very closely.

If the property rented is a family home, there is much to consider. Cupboards and wardrobes will have to be emptied and personal possessions removed. The property will have to be properly cleaned, and there is the small matter of finding somewhere else to stay. Insurers and mortgage companies may not be too happy about the idea and if something went wrong, it could prove a very costly mistake. Any lease will need to be checked and where applicable, permission obtained. Not only that, if a boiler fails or washing machine leaks, it will have to be addressed very quickly. It is also the landlord’s responsibility to ensure that the property is compliant with the various regulations concerning gas, electricity, smoke alarms and furnishings. Tenants don't always treat a holiday let as they would their own home and if in the party mood, you may come home to more than bargained for.

The Council of Mortgage Lenders (CML), said: ‘If borrowers want to make any changes to their mortgage, because they want to rent out their property short term for example, they need to contact their lender to discuss the request as their contract is unlikely to cover this. ‘They would also need to contact their insurer as they would potentially not be covered in the event of a claim.’

Another issue is that existing properties already rented out will need to be vacant in time for the Olympic visitor’s arrival. If the tenancy allows, notice under Section 21 of the 1988 Housing Act will have to be served not less than 2 months before possession is required. Sounds simple; but there is already a huge shortage of rental properties for tenants. With the demand for properties over the Olympic month, this shortage will be compounded to levels we can’t really imagine.

IF your tenant can’t find somewhere to live and simply refuses to leave, you will then be faced with the problem of people whom have entered into a contract, paid money in advance and no means of forcing your existing tenants to leave. I would imagine visitors from overseas looking forward to settling in to their expensive holiday let will be more than a little angry and will show little regard for the 1977 Protection from Eviction Act which may cause further problems for even the most well meaning landlord particularly as they won’t be able to book into a hotel overnight whilst the problem is resolved.

Problems don’t stop there. There is also the small matter of what the BBC termed a ‘postcode lottery’. Westminster effectively bans short term lets of 90 days or under unless planning permission is obtained, and rarely is it granted. Properties are advertised on the internet by location and it is very easy to identify an address. The council will be checking up and landlords and homeowners face a criminal record and fines of up to £20,000. It’s not just Westminster who has taken this stance. Southwark, Tower Hamlets, Islington, Kensington and Chelsea, Westminster and Camden warned people who let properties for short periods without planning permission could be served with enforcement notices. More may follow as councils are keen to preserve the PRS stock required for the capitals workers at a time when buying is so difficult.

An agent offering rental services for the Olympic month must make themselves aware of restrictions and properly advise landlords or potentially face claims for compensation.

There is also a risk to potential tenants desperate for accommodation. They will be required to provide funds in advance and may turn up to discover that there is no property at all. It has happened for normal lettings so why would this be different; which is why most sensible tenants would use a reputable agent which in turn means there is more chance of the tax man discovering the windfall.

The more cynical side of me wonders whether one or two tenants will seize this opportunity themselves and book in Caribbean holidays whilst ignoring any restriction on subletting. This will be far harder for the Local Authorities and taxman to trace but openly advertised properties may result in the landlord receiving enforcement action through no fault of their own. What is worse for a landlord who discovers his tenant has cashed in despite the tenancy agreement prohibiting subletting without consent is that there is very little they can do retrospectively.

Also bear in mind, with such a shortage of available properties, any visitor may pack in more people than you expected. I even heard of one property rented for the Olympics to a 'couple' being re-advertised on a website as 'sleeping up to 8'.

Andrew Stunell from the CLG said: “We have received no evidence that landlords are seeking to evict tenants in order to let at higher rents during the London 2012 Olympics." Ask him again in April when the S21's (notice to quit) start getting mailed out - fact is, tenants wont know their landlords plans yet and landlords aren't going to tell anyone.

Yes, there is a golden opportunity for some with such huge rents being demanded. However, deduct the cost of tax, the increased fees charged by agents, the cost of cleaning, preparation and alternative accommodation and how much will you actually profit? Remember, the Olympics is but 3 weeks of the year and there are risks associated in cashing in on the potential benefits. If you feel that the extra revenue is worth the effort and risk, then fair enough - but please just take one piece of well intentioned advice: Take all the risks you feel are merited, but please, invest in proper insurance.

We believe that landlords should do what they feel is best for them, but should be fully informed of the potential pit falls before making their decision.

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Bushells is one of London's leading Estate Agents. Founded in 1937, we are one of the most successful estate agents in London. We are members of all recognised industry bodies including ARLA, TPO and NAEA.