Law News,Tenant Fees Ban

Who is going to pay for the Tenant Fees Ban?

Emily Morley - June 6, 2018

Tenant Fees Ban

Written by TheHouseShop

 

2 years ago it was announced that tenant fees would be banned. So where are we now?

Let’s rewind a little

In 2016 the government planned to ban letting fees paid by tenants. The aim was to create a more affordable private rented sector and to subsequently improve the fairness between landlords and tenants. And, if you ask us, this has been long overdue!

For too long renters have been paying excessive prices to letting agents and landlords. On average, people spend around £404 everytime that they move home, and some cases have seen fees exceeding £800. It is excessive payments such as this that spurred the government to create a fairer playing field for tenants.

And that is where the Tenant Fees Bill comes in. This bill plans to remove hidden costs for tenants by implementing new rules that will change how people rent.

So what are these rules?

(scroll down if you want to skip the boring legal stuff)

The bill, if passed by parliament, will:

  • Ban letting fees.
  • Cap tenant deposits at 6 weeks rent.
  • Cap holding deposits at 1 week rent.
  • Create a fine of £5,000 for those who breach the ban, making it a criminal offence with an overall maximum penalty of £30,000.
  • Modify the Consumer Rights Act 2015 to clarify that letting agent transparency requirements will also apply to property portals (like Rightmove, TheHouseShop, Zoopla etc.)
  • Instruct Trading Standards to impose the ban and subsequently make provisions for tenants to be able to recover unlawfully charged fees.
  • Reduce the charges for a change in tenancy to £50 (unless the landlord can prove that the cost exceeded this amount).
  • Prohibit landlords from claiming possession of their property via the Section 21 Housing Act 1988 procedure, until they have repaid any and all unlawfully charged fees to the tenants.
  • Allow local authorities to retain any finances gained through penalties and utilise this money for future local housing enforcement.

Agents and landlords will only be able to charge tenants for:

  • Rent.
  • Deposits.
  • A change in terms, or an early termination of a tenancy (only when requested by the tenant themselves).
  • Utilities, Council tax etc.
  • Damages or costs accrued by the tenant, as fault of the tenant, such as replacing a lost key.

(you can stop scrolling now)

As the fees are taken away from tenants they will inevitably fall to landlords and letting agents costing them around £82.9 million and £157.1 million, respectively. This is an extortionate financial hit and landlords and letting agents will have to be prepared. That money is going to have to come from somewhere and letting agents will either have to absorb those fees or re-direct them, and it is no surprise to hear that landlords are most likely to take the hit.

The government have even admitted this themselves, claiming that they ‘expect that landlords using letting agents will see their fees rise by an amount equivalent to 50% of what their letting agent was charging their tenant.’

Since tenant fees account for around one fifth of a letting agent’s revenue, they are going to be left short once the bill comes into play. Two thirds of letting agents have already said that they plan to salvage the subsequent losses by claiming the costs from their landlords to avoid absorbing the cost themselves.

So letting agents are going to cope by shifting the fees to landlords, but how are landlords going to cope?

The biggest concern is that landlords will continue this knock-on effect by increasing rent for their tenants to cover the costs that the ban will pass to them. This assumption comes from past experience, as a similar ban was put in place in Scotland in 2012 and subsequently landlords increased rental prices by 6 to 8%. It is very possible that we will see a similar situation once the Tenant Fees Ban comes to fruition in England. But doesn’t this kind of make the Ban redundant? We will let the landlords decide…

It seems that landlords will be taking the full brunt of the Tenant Fees Ban, making the whole ‘fairer playing field’ idea slightly questionable. So what should landlords do now?

Many landlords may begin to question their relationship with their letting agents and start to re-evaluate their financial situation. And with a looming £82.9 million fee increase overshadowing them, it is no surprise that many may decide to ditch their letting agents and go it alone.

And although this seems like a good idea, to stick it to the man and save yourself some extra dough. Landlords might want to sit and think about what their lettings agents actually do for them…

With over 400 regulations and 145 individual laws, landlords cannot legally afford to go it alone and manage their properties themselves. Doing so would mean that they need to be well versed in the legalities of the rental sector and must be fully aware and confident in their compliance. A difficult task for even the best of landlords. Almost 1 in 5 landlords admitted they find  it ‘impossible’ to keep up with constant regulation changes. So maybe cutting ties with a letting agent isn’t the easiest decision. As a result, landlords have found themselves between a rock and a hard place. Stay and incur millions of pounds of fees, or leave and face the legal world on their own.

So what’s the key to beating the Tenant Fees Ban?

Landlords can breathe a sigh of relief as TheHouseShop offers some well needed cushioning. Keeping landlords compliant and profitable, their property management service offers the same comprehensive level of service that they were receiving, or would expect, from a traditional letting agent, but for a fraction of the price!

For £59.99 a month, no matter the rental income, TheHouseShop will cover anything from rent collection to legal advice, 24 hours a day, 365 days a year.

The comprehensive, professional management service offered by TheHouseShop, will manage your rental property, deal directly with your tenants and will ensure that you are fully compliant with all legislation. A landlord can save, on average, £732 in fees each year!

More and more landlords have started exploring cheaper alternatives to traditional high street agents. In fact, TheHouseShop say that they have seen a significant increase in the number of landlords showing interest in the fixed price management service. This is a result of all the recent press coverage about the potential negative consequences of the fees ban for landlords.

You can check out TheHouseShop’s fixed fee property management service in more detail here:

https://www.thehouseshop.com/property-management

So, what are you waiting for? Save yourself money and beat the Tenant Fees Ban now!

Give them a call on 0800 048 8910 or visit their website for more information…