PROPTECH-X ‘Proptech & Property News’ Weekly Roundup: RICS | Reapit | Purplebricks

QC investigating RICS produces 400-page report 

RICS has been handed a 400-page report compiled by QC Alison Levitt, who was tasked to look into a number of allegations made with regard to actions that occurred in 2018. These centre around the dismissal of four directors, and matters of a financial nature. 

The whole process of looking at the inner workings of RICS has been hampered by delay, Levitt being the second QC to be appointed to carry out the investigation. Peter Oldham was the first QC to take the mantle but suddenly fell on his sword in April 2021, citing professional reasons for why he could not continue.

Also, unexpectedly in June 2021, COO Violetta Parylo resigned with immediate effect.

For anyone who does not know the background, in late 2019, four directors of RICS, Bruce McAra, Simon Hardwick, Steve Williams and Amarjit Atkar, were sacked. This took place after the four had said they felt uneasy about the way in which a report into RICS’ treasury management procedures had been dealt with.

They were specifically referring to a report by an accountancy firm that had stated that RICS was at possible risk of “unidentified fraud, misappropriation of funds and misreporting of financial performance.”  

It has been widely reported that, in asking for evidence from the RICS membership, QC Alison Levitt has received a tremendous amount of intel. It is hoped that clarity regarding the whole matter will soon be evident. 

Reapit acquires estate agency marketing tech

I confess that although Reapit is not a client, I do have a strong bond to their brand, their vision, and their strategic business sense. Accel-KKR, the private equity firm backing Reapit, are making shrewd moves to leverage its value. The Reapit brand is one known to many in the UK real estate space and one I have followed closely for over two decades. 

I report in full their press release of the 13^th of August, as it shows how the marriage of established businesses can really generate a huge impact by giving companies access to new marketplaces.

If PRS has an EPC rating of C, who will foot the bill? 

Since the bill has passed its first outing in parliament, there are plans afoot that mean rental properties in the PRS should have a C rating for energy efficiency. At present, the legal EPC level is only E or above.

InventoryBase, hearing of the proposal, stated that: “The Department for Business, Energy and Industrial Strategy (BEIS) is considering proposals to increase the energy efficiency (EPC Rating) requirement for private rental sector properties to a C rating for all tenancies by 2028. 

Some landlords see this as by far the biggest threat to the buy-to-let market. It’s not far off and with all the other legislative changes, issues surrounding non-payment of rent due to the effects of the pandemic and changes to tax laws; will landlords now start to exit the PRS?

From April 2020 it became illegal to rent out a property with an EPC rating of less than E and it’s about to get a whole lot tougher. Latest surveys show that only 2% of homes currently have A and B EPC rating, with around 85 per cent having either C or D rating. Of the 4.5 million private rented homes in the UK, it is estimated that 1.7 million properties will never achieve an EPC rating of C or higher. 

As well as the proposal to raise the minimum EPC rating for private rental property to grade C, the new legislation could see private landlords facing fines, imposed by local Councils, of up to £30,000 for non-compliance.”

Of course, all of this upgrading of rental properties will come at a cost, and if it were to come into being in 2028, for my money that cost will be an increase in rents, which of course falls on the shoulders of people who rent.

Again, InventoryBase has some thoughts on this too.

“…the challenges posed by EPC 2028 both in terms of the costs involved in meeting the new standards and the limitations posed by “green lending” requirements will inevitably lead to a restructuring of the PRS. Over 80% of landlords surveyed who are renting property below C grade felt that the proposed EPC rating would cause them to sell or at least reduce all or some of their stock.

Not only could we see landlords exiting the rental market because of EPC regulations and impacting the choice and costs for tenants, but we could also see a transference of the issues of energy-efficient homes to owner-occupiers as a result of rental property sales.”

Let us hope that those in parliament take all of this into account.

Purplebricks share price tumbles again

The share price tells all. The barometer of fortune says that the Purplebricks online game is perilously close to the edge. When it listed on the Alternative Investment Market in December 2015 its share price was 95.5p. It rose to 498.5p in July 2017. Now it is just 61p.

Though it was bullish, recently saying it was going to employ people rather than have a gig economy model, Purplebricks now finds itself in between a rock and a hard place, pretending to be a national agent. And to think, the Connells Group and their £80 million profit requires a huge sales force, over a thousand branches, and insight and strategy.

In comparison, Purplebricks sales force is tiny, dispirited, and likely to be consigned to the history books, with its latest £3 million pre-tax profit looking to be turned into loss as the cost of “employing staff” hits the company balance sheet.

Also, we hear that many of the loyal local property experts are not happy that, in real terms, they may end up earning less and have their areas changed beyond recognition. Also, more senior self-employed staff are unhappy as their roles will be changing dramatically. 

Add to this the fact that Purplebricks is now going to be offering refunds, and that circa £10 million fund made up of fees, which they stockpile each year, is also likely to dwindle. With a case of increasing staffing costs, marginal profits, and less retained revenue, and a £4 million PR spend kicking off in September, it all begs the question, who is running the strategy here? 

Landlord survey shines spotlight on hygiene

A survey conducted by the Tenancy Deposit Scheme (TDS) asked over six hundred landlords and agents about cleanliness in their private rented properties. Cleaning topped the list of most frequent reasons for tenancy deposit disputes in 2020 and 2021, so TDS were keen to find out more about the experiences of property professionals at the end of a tenancy.

Some 64% of respondents said they had raised a deposit dispute due to cleanliness issues in the property. This was despite 83% specifically stating tenant cleaning obligations in their tenancy agreements.

The poll asked landlords and agents which rooms of the home suffered the most issues regarding cleanliness. 84% of those surveyed reported that kitchens were the dirtiest room at check-out, closely followed by bathrooms. Bedrooms, living rooms, appliances and windows were frequent offenders too.

Whilst less than half of property professionals don’t conduct interim cleaning checks during the tenancy, three quarters made it standard practice to professionally clean their rental properties before the start of each tenancy, regardless of the cleanliness from the previous tenancy.

Steve Harriott, Chief Executive at TDS said: “We hope this information helps tenants to understand their obligations when they move out, and which rooms require deeper cleaning before they leave their rented property. 

“By putting in the extra effort, many tenants can avoid any of their deposit being deducted at the end of tenancy. It’s encouraging how many property professionals include specific points in their tenancy agreements regarding cleaning, and also the number that ensures professional cleaning happens as standard.”

The Dispute Service has recently published further findings in its Annual Review 2020/21, which goes into detail about other common causes of deposit disputes, resolutions, and adjudication times. The report can be accessed via the TDS Information Lounge.

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Weekly proptech news in partnership with Estate Agent Networking