R2R and the issues within…
Oh bloody hell, where do I start?
I‘m pulling my hair out currently (haha my hair has all gone already, I know that, thank you for reminding me, there’s a reason why I wear a hat every day) with a couple of R2R operators.
I’m trying to work out if it’s their issue or just a natural hurdle that needs to be overcome but it’s frustrating nonetheless.
Over the years, I’ve had many HMO landlords approach me to sell (including 2 right now) their property with active R2R contracts in place.
As always, I explain that the R2R lease devalues the sale – in terms of accessibility, transparency, communication and, ultimately, the value I place on the property.
“We need to get the R2R operator onboard with the sale and we need full transparency of the total gross rents, the running costs, who’s in there, for how long and what maintenance issues there are”, I start with saying.
“And then we need an agreement where the R2R operator agrees to terminate their contract upon sale plus helps us with access requests and questions from buyers and conveyancers…”
❗️You can’t sell an HMO with a R2R lease in place without the support from the operator.
So what does this support look like?
First of all I need to have full access to the financial information and how well the HMO is performing to complete my valuation.
Then we need to have an agreement between the current owner and the R2R operator around how they end their contract. This isn’t always plain sailing, some R2R people get really stroppy when their landlord decides to sell.
It’s like we’re aliens coming from a different planet speaking another language.
It baffles me that I’ve never dealt with a R2R operator that has a clause or T&C’s in their contract that accounts for the eventuality of a landlord sale.
They can’t expect a sale embargo just because they have a lease in place, can they?
Many landlords choose to use a R2R company because they are sick and tired of the HMO they own – it’s not beyond the realms of possibility that this may lead them to choosing to sell at any time over the next 5 years…
My advice, for what it’s worth, if you are a R2R operator is factor in some clauses in your contract that allow for a landlord sale. I’m sure lots of you have already.
Otherwise we end up in a stand-off and a bartering situation and, ultimately, a property that can’t be sold.
By the way, if I can’t get transparency for my initial valuations then that means that a conveyancer or a lender won’t get transparency and that means the HMO is UNSALEABLE.
