Company lets in Aberdeen, better or worse?

There is an energy crisis. And Aberdeen as the energy capital of the UK is playing a key part to solve this crisis. It’s not only the oil and gas industry, it’s also now the renewable energy industry that is bringing more people into Aberdeen. As in the past, when influx of tenants increases, it tends to be led by companies bringing employees and their families to the Granite City.

Then landlords start asking for their properties to be let to an oil company, as if a ‘company let’ was at all times superior to a ‘normal’ ‘Private Residential Tenancy’ (PRT) let.  We deal with oil companies on a daily basis, and they are a superb source of tenants. It’s extremely important to note though, that a company let is not necessarily better or worse than a PRT let. Let’s cover the basics.

Private Residential Tenancies

A ‘Private Residential Tenancy’ (PRT) is the tenancy that, in accordance to the Private Housing (Tenancies) (Scotland) Act 2016, must be used for all residential tenancies where the tenant is an individual (i.e. not a corporate entity, which will lead to a ‘Company Let’), and the property is the tenant’s only or principal home. There are some other non-so frequent cases where this act doesn’t apply (Schedule 1, social housing letting and university lettings, to name a few), but for the simplicity of this article let’s concentrate on PRTs and Company lets.

Private Housing (Tenancies) (Scotland) Act 2016 is designed to give tenants greater security of tenure. Therefore PRT tenancies give considerable benefits to the tenants, particularly when it comes to the length of the tenancy (no minimum period).

Company lets

On the other hand, company lets are governed by Common Law. Although at firs sight this could imply that the tenancy contract will not benefit the tenant, this could be quite a long way from the truth. The tenancy contract of a Company Lets have no prescribed format or clauses, thus the conditions vary enormously. Oil and Gas Companies (the kind of tenant that most landlords long for in Aberdeen) tend to put on the table their own tenancy contract, with very little room for negotiation (other than the rent and the period of the tenancy, which is clearly agreed at the onset of the negotiation) once the employee finds the property of their like. The rent tend to be fixed for the duration of the tenancy and there is no deposit to cover any damages or rent payment. Having said that, since the tenant is a well stablished company, rent payment and cover damages are rarely an issue. 

In generic terms, we could compare PRTs and company lets using the table below:

In our experience, rather than concentrating on whether the tenant is a company or an individual the effort needs to be made on identifying and following up all leads to secure the highest rent and the fastest tenancy, with a tenant (whether they are a company or an individual) that excels through our thorough referencing and financial checks. That will bring the highest rewards and lowest risk to the landlord.

360 Virtual Tours vs Walk-through Videos

Virtual tour, video walk-through (or should it be 'walk-through video?), online viewing, viewing webinar, WhatsApp viewing, Zoom call, just to name a few. Most of these terms were not used prior to the unforgettable 2020. But the challenge of the COVID-19 pandemic and lockdown pushed the estate and letting agency business into a completely territory: the territory of serving customers whilst they were at home.

The old school agents would say that all these online tools are gimmicks that will be forgotten once the restrictions are fully lifter. They would be the same agents that said 20 years ago that online portals would never replace window cards and newspaper ads. They would be the same agents that said 10 years ago that social media was not for the professional agents. But these agents will be spending most of their marketing budget in internet portals and social media ads today.

Virtual tours, walk-through videos, and other online viewing tools will never replace a physical viewing to a property. But these tools are now essential to bring good quality buyers and tenants through the front door. Those sellers, landlords and agents who refuse to bring them to their toolbox are drastically reducing their chances of succeeding in a tough competitive market.

The good old days!

Prior to the pandemic, the main two ways of improving your chances to get your property seen were:

Professional Pictures: We would spend hundreds of pounds commissioning professional pictures. They had to have a great composition, good lighting, sharp and tell a story.

A great description: A Shakespeare homage to property and business would have been a good start!

But in the last 18 months we all have learnt that we can do much more from home. We still seek the final 'real' outcome: the holiday, the theater night out, the meal of our choice, the workout with our friends. But more steps of that decision making, if not the whole process including the final result, can be completed from the comfort of our home.

In the letting agent world this means the introduction of some element, which weren't new, but had been ignored until then.

Walk-though videos

The simplest form will be an unedited video taken using a smartphone, with very little preparation of the property. As soon as the video is completed it's uploaded on YouTube (for free) and shared in the property portals (Rightmove, Zoopla, etc). This approach is:

• Fast

• OK for low end, not so well presented properties

• It gathers the initial attention of the potential tenant (Oh, the property has a video!)

• It seriously risk losing the potential tenant away from the property. At the end of the video, the tenant will be given a handful of options of next videos to watch in YouTube. That's opposite to the result we want to achieve: we need the potential applicant to make an enquiry about the property as soon as they finish watching the video.

On the other end of the spectrum, we have fully edited videos, with titles throughout the video and background music in line with the style of the property. Even more important, these videos are not hosted in YouTube, but in paid platforms, including Vimeo, which will allow the agent to control the 'Call to Action' at the end of the video. Buttons can be presented to take the potential tenant to the next step (to book a viewing), and the risk of the potential tenant getting distracted with other videos that have nothing to do with the property is completely removed. In summary, a well prepared walk-though video will have the following characteristics:

• It will take typically a day to shoot and edit.

• It will give a much better impression of the property, thus it should be used for high end properties

• It will also gather the attention to the potential tenant, but because it's nicer to the eye (and ears) the users is more likely to watch it to the end.

• It will keep the potential tenant in the 'property environment'. At the end of the video a very specific 'Call to Action' will take the tenant to the point of book an appointment to visit the property.

• It will avoid the risk of losing the tenant into the very busy and distracting environment of YouTube.

360 Virtual Tours

These virtual tours have nothing to do with a 'Walk-through Video'. These virtual tours are a presentation of the property in an format that allows the user (the potential tenant) to navigate throughout the property at their own pace, in the order that they would like, which is as close as it gets to the real experience to visiting the property. However, not all virtual tours are created equal! Similarly to what happens to walk-through videos, there are low end and high end virtual tours.

The simplest virtual tours are a series of 360 pictures (typically 1 picture per room) stitch together. The user can go to a room, look around from the middle of the room, and then click to the next door to move to the following room and repeat.

On the other side of the scale, we have 360 Interactive Virtual Tours. Matterport is the king of virtual tours. Although the principle is similar to a simple virtual tour, there are some fundamental differences:

• The images are very high resolutions. They are taken with a camera with a resolution of 128 Megapixels. For reference a typical high resolution pictures is only 18 Megapixels. They are also taken using a sturdy professional tripod (the camera weighs over 3kgs!) that make the image extremely sharp.

• Most rooms images are built from 3 to 5 points, thus it gives the user a wider options to explore the room from different points.

• The presentation includes labels and explanations pointing to specific features of the property so that they can be promoted. It's as close as it gets to having a letting negotiator next to the user explaining the property in detail.

• The users can measure distances between walls, size of furniture, size of windows, which allows them to learn more about the property in advance, and prepare to the home move once they commit to the property.

• The presentation includes a 3D 'doll house' style mode, which allow the users to better understand the layout of the property (internally and externally), hence enhancing the overall experience. It's as close as it gets to 'visiting the real property'

What it's most important, a high end 360 Interactive Virtual Tour will give the tenant a sense of urgency. Yes, they are 'virtually' visiting the property from home. But another potential tenant could be doing exactly the same thing right now. They are not alone in a room with the letting agent in front of them. They are in the World Wide Web looking at something that, without a shadow of a doubt, somebody else is looking at too.

The excuses

After all this explanation, landlords will still ask, 'Well, but do I really need to have a 360 Interactive Virtual Tour?'. The answer is, 'It depends'. Do you want to rent you property fast at the highest rent? If the answer is 'Yes', then 'Absolutely, you will be better off having a 360 Interactive Virtual Tour'. This tool will put your property head above shoulders when compared to the rest of the market. Your property will receive more leads and you have a higher probability of having a good quality tenant in your property.

The next idea landlords will come up with will be, 'Well, we'll try without the 360 Virtual Tour for a few weeks, and if the property doesn't let then we will get the 360 Virtual Tour organised'. This argument defies logic. This argument is close to gambling. The suggestion is:

We don’t want to spend the cost of a virtual tour now (typically between £150 to £300, depending on the provider).

If we don't get a tenant within 'a few weeks' (which should be read more likely 1 to 2 months), then we think about it. By then, the landlord will be two month of rent (plus council tax and utilities) worse off, which will have made the cost of a virtual tour to look ridiculously low.

If the landlord is lucky enough to find a tenant quick (against competitors that have 360 Interactive Virtual Tours), great new! Or not? What will happen when the property comes back to the market in a couple of years? If a 360 Interactive Virtual Tour was completed now, the property could be promoted with all the 21st century tools available even before the tenant vacates the property. If no 360 Interactive Virtual Tour is completed now then we will rely on the old pictures and description (the same way that properties were promoted in the 19th century) to let the property again. If that happens at a time when the market is not in favour of the landlord, hindsight would say 'It would have been great to have a 360 Interactive Virtual Tour' when we first thought about it.

We have seen them all. We have seen properties with 360 Interactive Virtual Tours let fast once (and in some cases twice after short tenancies). And we have seen good, nice properties, sitting empty, just because on the final stretch, after investing hundreds of thousands of pounds in a property, landlords elect to save £150 on marketing. 'You can lead a horse to the water, but you can't make it drink.'

Unless landlords are not bothered about letting their property fast at the highest possible rent, they should give very serious consideration to 360 Interactive Virtual Tours.

Whether you are a DIY landlord and you do all your marketing, or you outsource the marketing and management of your portfolio, embrace technology with both hands and start using 360 Interactive Virtual Tours.

The last 18 month - renting out properties in Aberdeen during COVID-19

We are going into LOCKDOWN!

18 months ago Scotland went into lockdown, as the extent of the COVID-19 pandemic became clearer. The level of uncertainty about our lives, our economy and our way of life was unprecedented.

18 months later, we can have a look at the event as they unfolded, and learn from them.

The threats

As a letting agency we identified some potential critical problems, although we had no idea on how difficult or easy these challenges were going to be:

• Keeping properties well maintained and inspected

• Tenants in arrears as the economy collapsed

• Properties being vacated and inability to let these properties again

• Financial viability of the business itself

We reduced our team to five people, including our accounting team. The rest of the team was sent on furlough (a word that many people had never used before!).

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Payment holidays and arrears

The legislation around private residential tenancies changed, with the spirit of protecting tenants against eviction. In broad terms, the criteria to evict tenants was made more restrictive (to the landlord) and the notice periods were increased to up to six months.

Over the following weeks we had 17 cases of tenants approaching us requesting a payment holiday of their rent. The number was much lower that we initially anticipated, nevertheless we needed to react to this new kind of event.

As a response to this, we designed a online and over the phone process by which we would allow tenants to demonstrate the severity of their financial circumstances to the point that a payment holiday request could be put forward to the landlord. Out of these 17 cases, only 8 submitted the required information. The other 9 requests were simply withdrawn. Out of the 8 cases that made a request, a combination of temporary rent holiday or rent reduction was granted by the landlord. By September 2020, all cases but two were back in full payment with any arrears paid back. What we felt was one of the biggest threats, never materialised to the extent that we expected. Both parties, landlords and tenants had acted responsibly

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Inspecting properties

When it came to property maintenance the biggest challenge that we faced was the inability to visit the properties. At the peak of the lockdown not even our team were allowed out. As measures were eased, tenants were extremely reluctant to let anybody into their property. As an alternative (not ideal, but better than nothing) video inspections carried our by the tenants became the normal practice, until the second half of 2021, when a full on-site inspection regime (whilst maintaining social distancing rules and under the full consent of the tenants) was re-started. Once again, landlords and tenants had acted responsibly, showing a great degree of flexibility.

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Portfolio shrinking

The biggest threat that did materialise was the speed at which our managed portfolio was vacated. By the end of June 2020 16% of our managed tenancies had been terminated by the tenants, as they were moving away from Aberdeen (mainly students) or did not required their Monday to Friday accommodation (commuters that now were working from home remotely).

At the time we had to pause and come up with new ideas about how to let this ever increasing number of empty properties as soon as the lockdown measures were eased. We soon implemented:

• 360 Interactive Virtual Tours (Matterport)

• High quality Walk-through videos with titles and background music

• ‘Open day’ webinars to show properties to multiple tenants simultaneously (this became extremely useful with HMO properties).

The results were felt immediately. As soon as tenants were allowed to go back on the market (virtual viewings were recommended), the flow of new applications came like an avalanche. In July we let 47 properties, and in August we let another 47. To put this in context, in January and February 2020 we had let 12 and 18 properties respectively.

During those months of pause a review of our portfolio was carried out. Landlords were encouraged to dramatically improve the standard and presentation of their properties and now they could see that their investment was paying off.

The last quarter of 2020 and the first half of 2021 were fairly stable, but summer 2021 showed a considerable increase on the interest of high end properties in Aberdeen. This was excellent news since this is the core of our operation. The West End, Cults, Bieldside and Milltimber have become places where rental properties were snatched in days.

After the storm

There is no doubt that COVID-19 was one the biggest challenge for many in their lifetime. Physical and mental health issues, death, financial difficulty and adaptation to a new way fo life. If could go back in time and avoid it, humanity would have done so. That is not an option. Leaving the personal losses at many levels, we feel that the COVID-19 pandemic and lockdown was an incredible opportunity to learn an grow. As a business we learnt:

The importance of correct procedures in place, that can be swiftly changed and adapted to new circumstances.

The importance of being able to think outside the box and come with new, simple but effective ideas that if carried out consistently can produce a massive change. Our new way of marketing properties is proof of this.

The importance of good communication with our customers. Despite any differences, and regardless of the interest collisions that at time happened, the best of everybody came out when it was needed.

And, as Director of Martin & Co Aberdeen, I learnt, by going back on my steps and discovering some serious mistakes that I had made in the past, that having a great team, fully trained, fully motivated and willing to go the extra mile for our customers, is priceless.

The worst is behind us, we hope, but regardless of that, we have come out of this stronger. Thanks to all parties for their support for the last 18 moths.

Council Tax Exemption for vacated student accommodation extended

Landlords in Scotland have been able to claim a Council Tax exemption for a period up-to 4 months after their student tenants vacated their property.  This exemption is based on ‘The Council Tax (Exempt Dwellings) (Scotland) Order 1997.    Now that exemption has been extended until at least 30-Sep-2020.  This is thanks to the Coronavirus (Scotland) (No. 2) Act 2020, which became law on 26-May-2020. 

In very simple terms, students are exempted from paying Council Tax provided that in, very broad terms (certain criteria needs to be met) all the occupiers are students.  When students vacate the property, in normal circumstances this exemption can be extended by up to 4 months if the property remains unoccupied.  This exemption is normally widely used by landlords that cater for students, since the are likely to have the property empty for a few months in between academic years (June to August).  Without this exemption landlords would be liable for Council Tax payments as soon as the students vacated the property.

Due to the Covid-19 lockdown, university and college closed their doors to face-to-face activities in late March 2020, with no indication of when the normal activities would re-start.  A vast number of students elected to give their landlords the stipulated 28-day notice, thus by the end of April 2020 there were a considerable large number of vacant student accommodation.  In normal circumstances landlords would have been able to apply for the Council Tax exemption until August 2020.  However at the time of writing this article (May 2020), there is no certainty on whether colleges and universities will go back to face-to-face activities in September 2020.  To ease the pressure on landlords of empty properties (who will be suffering from lack of income anyway), the Scottish Government has extended the exemption for Council Tax for student accommodation until 30 September 2020, by passing the Coronavirus (Scotland) (No. 2) Act 2020.  There is a provision to extend some of the measures of this Act after September 2020 , and the feelings is that at least some of the measures will indeed be extended. But it will depend on how the Covid-19 lockdown and politics evolve between now and then.

If you have any queries about Covid-19 lockdown and how this could affect your property business in Aberdeen, please contact the office on 01224-636500.  

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For some bed-time reading, please use the links below to access the Acts in full

Coronavirus (Scotland) Act 2020
http://www.legislation.gov.uk/asp/2020/7/data.pdf

Coronavirus (Scotland) (No. 2) Act 2020
http://www.legislation.gov.uk/asp/2020/10/pdfs/asp_20200010_en.pdf

The Council Tax (Exempt Dwelling) Scotland Order 1997
http://www.legislation.gov.uk/uksi/1997/728/schedule/1/made