The Tenant Fees Ban and Its Impact
The Tenant Fees Act will come into effect on June 1, 2019, and its introduction is certainly causing a stir in the industry. But what will be its impact on landlords, tenants and agents? We’re not here to give you the nitty gritty details of the Act but to provide a broader perspective. Reliable sources of information regarding the upcoming changes can be found at the end of this article.
Impact on Landlords
The impact on landlords will not be significant, providing properties have been managed and charged fairly. If a property’s management is outsourced to an agency, then it is up to the agency to manage charges so they do not pass on all the costs that used to be paid by the tenants. It is the agency’s responsibility to negotiate with suppliers to find a way to lower prices, which should not be difficult. If a landlord self-manages properties, the impact of this Act should be even less. Many self-managing landlords carry out their own inventories and already levy minimal charges to tenants.
Impact on Tenants
The impact on tenants will be significant: although fees are reduced, they will lose their skin in the game. With no fees, there is little incentive for agents to negotiate terms on tenants’ behalf during the referencing stage. It is also true to say that there are some costs that tenants should bear to be fair, for example, one of the inventory reports (usually check-in). This is a means by which tenants can prove in what condition a property was when they began to live in it. Inventory report is often a critical tool for use in court when alleged damages are concerned. For this and other reasons, we think it regrettable the government has eliminated fees rather than capping them. An unintended consequence of this change is higher rents for tenants.
Impact for Agencies
The impact on agencies will be mixed. For some, tenancy fee is not a significant part of their income yet for others, it is so much that this may become a reason to stop trading. Yes, cashflow will be affected and that is painful, but some of the changes are fair and beneficial. For example, agents must now take holding deposits from one source (i.e. one applicant per property). The amount is capped to one week’s rent and held for a maximum of 15 days, unless there is an extension agreement with the tenant. For far too long, many agencies have taken multiple deposits and pitched tenants against one another, then taking non-refundable admin fees from those who did not secure the property.
Most of the fuss being made comes from the lettings industry, and rightly so; it is the small number of rogue agents and landlords who have been charging exorbitant fees that marred this sector for reputable companies. The debate about the Tenant Fees Act is not so much about whether it is good or bad but whether it is heading towards professionalising the industry and making it more transparent. We believe there is still a long way to go. We are seeing a higher number of landlords either keen to sell and move on or to manage properties themselves. Whichever method works for you, be assured we can help with both.
Gov.uk – Several guidance for landlord, tenants and agents
National Landlord Association – There are many articles on this but this is their latest.
Guild of Residential Landlords – a hybrid of the above here.
Confused about the Tenant Fee Ban? Looking to sell or self-manage? Call us on 0203 588 5115 today to learn how we can help.
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