How will landlords protect their bottom line?
Some background information
We are moving towards becoming a nation of renters. In the last decade, the number of people renting their property has doubled and this trend is set to continue.
Letting agents charge both landlords and tenants, letting fees when arranging a new tenancy. These fees have historically covered such things as admin services, reference checks, inventory checks and credit and immigration checks. Many agents have generally not openly disclosed these fees to tenants, meaning that it has been difficult for them to shop around to ensure that they are getting the best deal.
Since 2015, the Consumer Rights Act has stipulated that agents publish all their fees on their website or face a fine of up to £5,000. Regardless, some agents still do not publish their fees and of those that do, some have not disclosed VAT charges clearly.
Letting Fees for Tenants
Generation Rent, a campaign group working to improve the private rented sector for tenants, has found tenants being charged an average of £404 for a new tenancy and £117 for tenancy renewals. This has meant that some tenants have found it especially difficult to find somewhere to live especially if they are on a lower income. Lower income tenants could also be hit with rent guarantor charges. Surprisingly, some lettings agents have even charged tenants for overpaying their rent!
On 21st Jun 2017, the Queens speech, in the interests of fairness and transparency, proposed a ban on charging tenants letting fees in England via the Draft Tenant’s Fees Bill. This bill bans landlords and agents from charging tenants a letting fee as a requirement of their tenancy and will make renting fairer, especially for those on a lower income.
What impact will this have on Landlords?
As letting agents will not be able to charge letting fees to tenants, they may pass these costs onto landlords. This is further compounded by the stamp duty and tax changes affecting buy to let investors today. Landlords will thus need to recover their costs from somewhere meaning potential rent increases for tenants. As bad as this sounds, tenants may be more accepting of a rent increase than stumping up a lump sum of cash at the outset of every new tenancy.