Problems With Owning an Empty Property
And what you can do about it ...
Problems With Owning An Empty Property
Owning property isn’t always a good thing.
Having such an asset is great, if you manage it well.
But if you end up in a particular situation, it could end up being one huge debt that simply isn't reducing.
One of the most common ways in which owning a property becomes a problem is when people own one that is empty. There could be many different reasons for a property staying empty, but the bottom line is that an empty property will only keep draining your finances. Unless, that is, you sell it or rent it.
Reasons a property becomes vacant
There are of course a number of reasons for a property being left empty. However, there are common reasons that account for the large number of properties that are left empty every year.
- Cost. The owner of the property simply cannot afford the cost of keeping a property. This can also include the cost of maintaining the house's upkeep. While they may not face issues around a mortgage and it’s payments, they still can’t maintain a house.
- There could be leasehold problems. Making things difficult for the owner of a property when it comes time to sell.
- An inheritance issue. Someone could have inherited a property after a bereavement and be extremely difficult to contact, and while people try to contact them the property could be sitting empty.
- Issues around death duties or taxes of another kind not being paid. Learn more: Wills, Probate and Inheritance Explained.
- Problems around large-scale repairs. A house in disrepair can become unmanageable, leaving the property uninhabitable.
Cost of owning an empty property
First of all, it’s important to know what the current situation is. There are a large number of empty properties in the UK. Some estimates have it at more than 200,000.
One big aspect of the problem is focused on London. The issue of ‘buy to leave’ (where wealthy people buy properties in London and then hope they rise in value) has plagued the capital for some time. Other parts of the country may not have such a high concentration of empty properties, but they are still problematic.
An empty property could mean:
Ongoing council tax payments. This can eat into your income substantially. Council tax can be very difficult to manage on one’s own property. If you look at the image below, you’ll see how the tax is rising and presenting a real issue for property owners.
However, the problem becomes an even bigger one when you look at the finer details. Councils can charge up to an extra 50% council tax on properties that have been empty for more than two years. And the Chancellor has also announced plans to increase council tax by another 50% for homes that have been empty for longer than 24 months.
Note: The increases have been large, especially in certain regions, which have seen a rise of 5% in just one year.
Vandalism and other issues like arson. Empty properties are tempting for vandals and can be targeted.
Structural damage to the building. This could take the shape of leaks that lead to damp, mould and fungi or other long term structural issues that are not noticed, and then continue causing real problems for the building.
Insurance issues. Insurance companies will have concerns around insuring a property that has been left empty for a while. There are specialist companies who do offer cover, but most conventional companies won’t stretch beyond a couple of months cover.
A general loss of value. Depreciation in value is perhaps the most worrying concern about an empty property. This is compounded if value is not added to the house through upkeep. Such a property could quite easily lose thousands in value if left for a year, for example.
Pressure from the local council. Depending on the council the property falls under, there will be at least some pressure to have the property occupied. At the very least, a council can ask that you keep the property in good order (including the grounds/garden attached to the property).
This is a serious matter, and can be even more problematic if the property becomes an eyesore. Councils have been known to take legal action if a property is extremely unattractive due to lack of care, for example. They can force you to make things right.
Note: The law says you have to keep the property looking pleasant and maintained to a certain standard.
Loss of rent. If you added up all the rent the property could be receiving on an annual basis (equivalent to a similar sized property and local averages) you will see that you are missing out on a substantial sum, every year.
The wider issue
Like anywhere else in the world, empty properties cause bigger problems, with issues often affecting the area around the property as well as just the property itself. The owner may well have problems, but the empty building makes things difficult for others too.
Many people believe that leaving homes empty is a waste, especially when considering the problems people have buying property in the first place. It's increasingly difficult for people to get on the property ladder, with ‘first-time buyers’ unable to put a deposit together. An empty property may simply add to this problem by increasing the shortage in housing, and therefore prices.
Homes left in states of disrepair can cause larger problems for the local neighbourhood. They can lead to issues such as fly-tipping, as well as vandalism issues.
We must remember, there is a housing shortage in the UK.
An empty property will only exacerbate the issue, and lead to more problems in the future.
What are the options?
Of course, the options depend on your particular circumstances, but there are a few things you can do to take care of the empty property and ensure it starts to bring in income of some kind.
Rent it out
One of the quickest ways to make money on an empty property is to put it on the rental market. With tenants, you receive income on a regular basis, and you don’t waste money by having a property that is empty.
However, renting out a property has its issues too.
|Repairs||Some tenants expect their landlord to manage every repair, including arguably small ones like replacing a lightbulb. While this may sound silly, it’s reasonable. In addition, you’ll be liable for water leaks and other larger issues|
|Late payers||This is part and parcel of renting a property out. You’ll have to be prepared to work out what you will accept and what you simply cannot tolerate when it comes to late payment|
|Safety||The property has to be 100% safe. If it isn’t, you’ll be liable for any injuries|
|Problem tenants||It’s not all about late payment. Noise pollution and antisocial behaviour need to be dealt with by you as landlord|
Perhaps it’s a rather obvious solution but selling is a way of dealing with the issue of an empty property. You can do this in a number of ways now, which means that you have a little more freedom when selling.
Using an estate agent is the most common way of selling a property that is empty. There are issues and aspects of the process that make it problematic, especially if the property has been empty for a long time and you need the income quickly.
You need to bear in mind that selling through an estate agent could mean a very long wait. On top of that you also have to be certain you’re dealing with an estate agent that is reputable, and knows the local area and prices well.
Private house sales
Some sellers prefer not to use local estate agents and consider selling their house privately. This is a great way to do it, as long as you’re able to manage the substantial work and stress involved in doing so.
Auctions are another option for selling. While they may seem quicker than a conventional estate agent route, it’s worth bearing in mind that auctions are always at a certain time in the month. This may or may not suit your requirements. On top of that, you also face the possibility of a low reserve price, something you can’t influence, and that price that is most likely considerably lower than you expect it to be.
Cash house buyers
Other options include the use of a we buy any house organisation. There are many of these in all regions of the UK, and they do a great job of taking away the stress and strain that you may feel if you go on the market with an estate agent. The main quality of a cash house buyer is the speed. They have been known to turn around a house sale in under one week. This is obviously because of the cash buying aspect.
Even more importantly, they can also handle pretty much all aspects of the house selling process, including conveyancing.
If you're planning to sell it
One of the best options is to sell the property. This means you gain income and also avoid all the expense that would have occurred through keeping the empty property.
One thing you may need to consider is the work that is needed for the property. If you’re hoping to sell, then in most cases, and with most buyers, it needs to be in good condition. If it’s a property that has been empty for a while, repairs may be a big part of moving forward.
It’s always a good idea to look around for a quality builder or tradesperson, and focusing on getting more than one quote makes sense in the long run.
Owning an empty property to manage will only end up costing you money. The sooner you get rid of it, the better. Consider all of your options and pick the best one for your circumstances. Then focus on making the property ready for sale and move on.