Posts with tag: landlords

How will ban on letting agent fees impact landlords?

Published On: November 23, 2016 at 4:07 pm

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Categories: Landlord News,Tenant Fees Ban

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Today saw Chancellor Philip Hammond announce a ban of letting agent fees to be charged to tenants. Unsurprisingly, this move has not gone down well in the sector, with key industry peers fearing that these costs will instead be passed down to tenants.

However, research from TheHouseShop.com has revealed that the would-be financial impact on buy-to-let investors might not actually be as bad as first feared.

Fees

Data from the investigation shows that the average fees charged to tenants in Britain is around £300. In London, this figure rises to around £700.

Letting agents typically charge a buy-to-let landlord between 10-15% of their rental income for a thorough management service. Based on the average UK rent for October 2016 of £902 per month, this will amount to around £95 per month. This in turn is roughly £1,140 over the course of a year’s agreement.

When the additional cost of tenancy fees, (around £300) are factored in, this adds up to an extra £25 per month.

Returns

While this will undoubtedly leave some landlords upset, TheHouseShop.com feels it will not seriously harm their return on investment. Taking the average rent of £902 per month and the average UK yield of 5%, it has calculated the loss in rental income and yield from proposed increase in fees for landlords.

The results can be seen below:

Letting agents fees pictures

[1]

Nick Marr, co-founder of TheHouseShop.com, notes: ‘The figures above show that even if letting agents are forced to pass on the costs of tenancy fees directly to landlords, it will not have a significant impact on the landlord’s overall yield and profits. In fact, the additional loss in returns could be as little as 0.14% when compared to the existing landlord fees structure.’[1]

How will ban on letting agent fees impact landlords?

How will ban on letting agent fees impact landlords?

‘Some landlords will undoubtedly raise their rents as a result of the ban – as we have seen in Scotland – but many will be able to absorb the costs of this new system without substantial losses, meaning tenants should not face a barrage of rent rises once the ban is in place. The other side of the argument here is that perhaps it should be the letting agents themselves who swallow the loss in fees, but tight margins in the High Street lettings market make this an unlikely scenario,’ he continued.[1]

Ban

Addressing the wider impact of a letting fees ban for both agents and landlords, Marr said: ‘Opponents of the proposed ban are claiming that a “short term fix” may seem appealing at first, but that in the long run it will be tenants who suffer as landlords raise rents to cover the higher costs of agency fees.’[1]

‘However, this is not necessarily true. The extra financial pressure on landlords will almost certainly result in them shopping around and trying to find the best price, and as landlords explore alternative options to the traditional letting agency service, I have no doubt that we will see a significant increase in the number of private landlords taking a more DIY approach to renting their properties.’[1]

Concluding, Marr stated: ‘It essentially comes down to a trade-off between convenience and costs, and good, reputable, hard-working letting agents will still be able to justify their costs to landlords.’[1]

[1] http://www.propertyreporter.co.uk/landlords/how-could-the-ban-on-letting-agent-fees-actually-affect-landlords.html

 

Letting Agent Fees to be Banned in Autumn Statement

Published On: November 23, 2016 at 11:24 am

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Categories: Landlord News,Tenant Fees Ban

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It is now widely expected that Chancellor Philip Hammond is to announce a ban on letting agent fees charged to tenants in today’s Autumn Statement.

Presently, tenants can be charged substantial fees for a number of administration tasks, such as conducting reference and Right to Rent checks.

Ban on letting agent fees

Mr Hammond believes that by shifting these costs to landlords, 4.3 million households could save hundreds of pounds.

He also feels that this move could increase competition amongst landlords, who can now search around for the cheapest agent.

However, the move has not gone down well within the industry.

Richard Lambert, Chief Executive Officer at the National Landlords Association, said: ‘The new Chancellor is clearly aware of the pressures facing those living in the private-rented sector, but in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.’[1]

‘There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long.  Banning letting agent fees will be welcomed by private tenants, at least in the short-term, because they won’t realise that it will boomerang back on them.’[1

Mr Lambert feels that as a result of the changes, ‘Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent.  But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents.’[1]

Letting Agent Fees to be Banned in Autumn Statement

Letting Agent Fees to be Banned in Autumn Statement

Increased costs for landlords

Richard Price, Executive Director at the UK Association of Letting Agents commented: ‘Arbitrary bans sound appealing as a quick fix, but the problem of affordability in the private-rented sector cannot be addressed by preventing legitimate businesses from charging for their services.’[1

‘A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents,’ he continued.[1]

David Cox, Managing Director of the Association of Residential Letting Agents, described the ban on letting agent fees as a, ‘draconian measure,’ which will have, ‘a profoundly negative impact on the rental market.’[2]

‘It will be the forth assault on the sector in just over a year and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account. Most letting agents do not profit from fees.’[2]

Welcome

However, Campbell Robb, chief executive of Shelter, observed that: ‘Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we are delighted with the Government’s decision to ban them. We have long been campaigning on this issue and it is great to see that the Government has taken note.’[2]

[1] http://www.landlords.org.uk/news-campaigns/news/hammonds-rental-boomerang-industry-bodies-respond-ban-on-letting-fees

[2] http://www.bbc.co.uk/news/business-38065249

 

Concerns raised over Airbnb short lets

Published On: November 22, 2016 at 12:10 pm

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Categories: Landlord News

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Concerns have been raised in the House of Lords over landlords who choose not to let properties to long-term tenants, but instead opt for less controlled short-term lets via Airbnb.

The issue was raised by Baroness Gardner of Parkes, who is herself a long-time landlord and has let properties in the capital for decades. Gardner raised the issue as part of the Renters’ Rights Bill.

Control

This measure concerns lets of six months or longer. However, Baroness Gardner warns that the Bill’s bid to exert greater control and costs on landlords and lettings could drive more into the Airbnb sector.

Baroness Gardner told peers: ‘People are overlooking the situation where, particularly in London, landlords are giving up ordinary residential lettings. There is quite a desperate shortage of lettings for ordinary people wishing to rent, because landlords can make so much more money out of Airbnb, which is totally uncontrolled. I opposed the practice when it came up last year during passage of the Deregulation Act, but no one else did.’[1]

Concerns raised over Airbnb short lets

Concerns raised over Airbnb short lets

‘Now, sure enough, Berlin is bringing in controls. New York, Vancouver—all these places—are finding themselves in the same position. The Mayor of London has acknowledged the problem. It is only capital cities that have ever had that limitation on short lets. Whether it is in the tenancy agreement or not, people are totally ignoring that and simply letting them, because they can earn as much in four months as an ordinary landlord would in the whole year’ she continued.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/house-of-lords-hears-of-concern-over-spread-of-airbnb-short-lets

 

Deadline to register for Rent Smart Wales is tomorrow

Published On: November 22, 2016 at 10:04 am

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Categories: Landlord News

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There are less than 24 hours to go until landlords in Wales must sign up to Rent Smart Wales.

The scheme, designed to push up quality of rented accommodation in the country, becomes mandatory tomorrow, 23rd November.

Licensing Scheme

Rent Smart Wales is a new licensing and registration scheme that went live last year. It represents a large change for the private rental sector in the country.

Landlords and letting agents must register their properties and undergo training to gain a licence, should they wish to self-manage their investment.

Investors have until midnight tonight to comply with the new legislation, before it becomes an offence to manage or to let a property without the necessary licence.

Deadline to register for Rent Smart Wales is tomorrow

Deadline to register for Rent Smart Wales is tomorrow

Registration

David Cox, Managing Director at the Association of Residential Letting Agents (ARLA) noted: ‘The law means landlords in Wales-and those in the rest of the UK who own properties in Wales-need to register themselves and their properties with Rent Smart Wales, as well as being suitably trained and licensed to carry out letting or property management activities.’[1]

‘If landlords do not wish to get trained, they need to arrange for a trained and licensed agent to manage their properties on their behalf. If landlords and agents find themselves unlicensed when the deadline arrives on 23 November, they will be unable to practice,’ he added.[1]

Landlords and agents can find out more about the Rent Smart Wales scheme by visiting the Government website.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/11/deadline-looms-for-landlords-to-register-in-wales

Renters’ Rights Bill continues progress through Lords

Published On: November 21, 2016 at 10:49 am

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Categories: Landlord News

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The Renters’ Rights Bill made more progress in the House of Lords last Friday. The Bill, which proposes changes to the charges letting agents are able to levy on tenants, now goes on to the Report Stage at a later date.

Amendments

During last week’s committee stage, proposer of the Bill, Liberal Democrat peer Baroness Grender, made amendments to her legislation.

Grender decided to make these changes as she felt the terminology used in the original document, ‘would leave too many options for newly named fees to be charged.’[1]

As opposed to specifying named fees to be banned, the amended Renters’ Right’s Bill now, ‘Bans all fees to the tenant from the letting agency and specifies that charging a fee to a tenant would be an offence.’[1]

There does however remain a sub-section in the proposal allowing the Secretary of State for Communities and Local Government to make an exemption. This is so that should evidence emerge of services in respect of which there is value to the tenant in charging fees, it could be done.

Best interests

Grender informed peers that she, ‘does not anticipate any such fees but my new amendment allows for the possibility, if concrete evidence was indeed found that a fee for specific service would be in the best interest of the tenant in some way.’[1]

Despite general support, not everyone present agreed with all elements of the Bill.

Renters' Rights Bill continues progress through Lords

Renters’ Rights Bill continues progress through Lords

Baroness Gardner of Parkes observed: ‘If the noble Baroness, Lady Grender, believes that people will simply reduce their rents, it is unrealistic. When she talks about how much rents have gone up, that is nothing compared to how much property has gone up.’[1]

Addressing other measures of the Bill, such as the mandatory registration of landlords and limits on deposits, Gardner said: ‘“I thoroughly approve of the idea that you should have access to a register of rogue landlords and all that, but it is unrealistic to imagine that this list of things which the noble Baroness has set out in detail will suddenly become inexpensive or vanish.’[1]

Responding, Grender noted: ‘There are good lettings agents out there who are members of government-accredited redress schemes and pursue best practice. They should continue to charge a fee for the work that they do but the fee should be from the landlord, who can shop around and choose which lettings agency to use. Landlords can decide to use the decent, regulated ones.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/renters-rights-bill–anti-fees-measure-continues-through-lords

 

Letting agent refutes one in four tax quit claim

Published On: November 18, 2016 at 2:57 pm

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Categories: Landlord News

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This week saw a concerning report stating that up to 25% of buy-to-let investors could be driven from the sector, as a result of existing and proposed tax changes.

However, a leading letting agent has moved to quash this prediction from the Residential Landlords Association.

Misleading

Ajay Jagota, head of North East lettings and sales firm KIS, feels the data is misleading and incomplete. He argues that it does not take into account regional variations.

Mr Jagota said: ‘I’m not disputing that these tax changes will affect landlords and that the ultimate losers will in all likelihood be the tenants whose rents go up to cover those costs – but this poll is less accurate than the polls which missed Brexit and the election of Trump.’[1]

‘We work with a similar amount of landlords to the total number who took part in the survey, and not one of them has even hinted to me at any point this entire year that they are thinking of selling up. Other major agents I’ve spoken to have said the same thing. So where are these one in four landlords who are packing in?’[1]

Letting agent refutes one in four quit claim

Letting agent refutes one in four quit claim

‘Self-selecting’

Continuing, Jagota said that the survey reflects, ‘1,000 probably self-selecting landlords,’ who in reality do not show the thoughts of the majority of investors.

‘There’s a wider issue here that some eye-catching headline figures are once again failing to accurately reflect reality on the ground. It happened in the 2015 election, it happened in the EU referendum, it happened in the US presidential election – but it also happens in housing,’ Jagota noted.[1]

Concluding, he said: ‘As a local agent you know the micro details about community you serve which will be missed by – even the Office of National Statistics would miss. You can even see when an individual street is on the up. But you are then told that statistics show how things are entirely different from what you’ve seen with your own eyes.’[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/letting-agent-rips-into-landlord-survey-of-buy-to-let-quitters