It was about a month ago when I showed an Iranian doctor a property in W2. The flat was a two bedroom top floor period conversion, in a location which was due to rise over the coming years. This assumption is backed up by a Knight Frank report which focused in on this location, known traditionally as the poor side of Hyde Park. This is where the smart money will go into.
Normally I take many reports with a pinch of salt, as mostly they are written by those who sit in ivory towers and whose feet never touch the ground. This one had some punch to it and was set firmly at ground level. The total supply was recorded from the planning permissions granted in the area, and this number was further broken down into those developments where work was actually underway, as not all developments with planning take off for one reason or another.
This report shows the supply will be very restricted in an area which is due to be experiencing a huge uplift due to the massive development taking place in and around Queensway.
This property sits right on the door step of the development.
The property was shown once and then twice as the doctor decided to bring his developer friend into the deal.
The property consists of 700 sq. ft., and it was cheap at £700k, the going rate is £1250 per sq. ft., and it’s a share of freehold. Leasehold properties are always a concern to the Asian mindset as they wish to keep property in the family for the next 21 generations.
This alone means the deal is a good one. There is a real big cherry on this pie as well; the property is likely to be granted planning for a mansard which will add a further 430 sq. ft. to the property, bringing it from a two bedroom to a four bedroom - two bathroom home at 1130 sq. ft. This adds more than 50% to the existing sq. ft.
The planners have confirmed that in their opinion planning will be granted.
The Doctor and his friend saw all of this and liked the deal. They were supposed to use the lawyers that held the contracts, and pay us our normal fees. However, over the weekend they had sent quite a firm email dictating the terms they wanted, which included switching lawyers at the last minute, and paying us a reduced fee. As this deal required quick action, and no dilly dally, we placed the deal on Monday morning to another party, who invested without seeing it.
We have negotiated a long four month completion, and applied for planning permission which we expect to be granted. The property has now been placed in Auction, for the 19th July 2017, in an attempt to resell the deal prior to completion. This only works if you leave enough fat on the deal for an incoming investor, in other words you cannot be too greedy.
The property may sell at the price we want, and it may not. If it doesn’t then it will be developed and kept, until the market strengthens and then it will be reassessed.
It’s a funny market at the moment, some things are selling way below what they should be, and others in excess of what they should be. A house I went to see, which was available at £2.7m, went into a bidding war and the price was agreed at £3.25m, £300k above the asking price.
Agony Agent
I thought this week I would tell you about a past issue that I personally have assisted a landlord with, as a break from the norm.
A letting agent arranged a tenancy for two years, for four tenants, who had offered to pay £50 per week more than the previous tenancy. The landlords were understandably happy that the agent had found tenants willing to pay a higher level of rent. However, nine months into the tenancy the landlords were contacted by the police to advise that they intended to raid the property as the heat signatures they had detected indicated that it may be being used for drugs. The police advised the landlords that the people living in the property were not those as recorded in the tenancy agreement and that references may have been forged.
Following the raid, which found that the property was being used as a cannabis farm, the landlords complained to the agent stating that they should have been more diligent in their referencing. The agent responded by arguing that, as per the previous tenancy, they had not used a referencing service provider, adding that the documents provided by the tenants contained no information which raised any alarms that something may have been wrong. As the landlords and the agent could not reach a resolution, the dispute was referred to my office where I found that the agent’s referencing of the tenants should have indeed raised some alarms:
l Three of the four tenants came from Vietnam, yet no documents had been obtained confirming that they had rights to live and work in the UK.
l Only two of the tenants had provided proof of a current and previous address.
l None of the tenants had provided a previous landlord reference.
l None of the tenants had been credit checked!!!!!!
Furthermore, from the information provided, I was not convinced that the agent had actually met all of the tenants.
It was clear that the agent had failed to act in accordance with Paragraphs 7a and 7c of The Property Ombudsman Code of Practice by "providing an appropriate referencing service". In my professional opinion no amount of referencing can ensure that a tenant will pay rent, and there are no guarantees that referencing a tenant will protect you from troublesome tenants, but it helps. In this instance, however, the agent had every reason to doubt that the tenants would be unsuitable for the tenancy. It was also apparent that the landlords were aware of the agent’s referencing methods through previous tenancies as referencing service providers were not used. As such, I advised the landlords that they should have asked more questions about the tenants before agreeing to the tenancy.
Luckily there was minimum damage to the property, and that was covered by the tenant’s deposit, so there was no loss of income for the landlords.
If you or somebody you know needs assistance with issues similar to this then please contact me at the office as I would be more than happy to help or offer some advice.
