Mooted since 2016, we now know that the Tenant Fees Bill, banning landlord and agents from charging fees to tenants has been given Royal Assent and will apply to all tenancies signed after June 1st 2019.
Now officially an Act of Parliament, the bill prevents landlords and agents from charging: ‘Anything not exempted, that the tenant is required to pay as a condition of the ‘of the grant, renewal, continuance, variation, assignment, novation or termination of’ an assured shorthold tenancy, or licence agreement. This includes payments to third parties, either for services throughout the tenancy or for specific performance of a job and loans from third parties.
The bill will mean landlords will mostly be limited to taking payments for rent and deposits from tenants and there will be a much tighter grip on rules surrounding the size of the deposits and how they are dealt with. Deposits will be limited to five weeks where annual rent is below £50,000 with new, stricter rules on holding deposits.
Despite this, damages caused by the tenant’s breach of tenancy, such as the costs of cleaning the property after the tenancy ends, will still be deductible from the deposit. Landlords can also still charge for a change to the tenancy requested by the tenant, or if a tenant wants to leave early. Finally there are two other ‘default fees’ landlords/agents will be able to charge (albeit limited), if either:
- the tenant loses their keys or
- is late paying the rent.
Industry experts and bodies have been warning for some time that the ban was likely to be passed as law and have been urging letting agents to make changes to the way they do business in preparation.
We have spoken to many agents where income will be significantly impacted by the ban. Some have been proactive, taking action to look for the the best way to drive additional revenue without damaging their existing landlord relationships. Others were happy to ‘wait and see’, sceptical as to whether the law would actually be passed. Now that the enforcement of the bill is on the horizon, its time to take action.
2019 has been branded as a critical year for the letting industry. This year will provide a challenge to high street agents wrestling with the emergence of online competitors and the introduction of the fees ban which threatens to wipe out between 10-25% of their revenue.
Of course a big advantage for high street agents is the people factor. The letting industry has historically been known as a ‘people business’ and if agents can work smart and implement some key new strategies they can continue to shine. In a blog back in 2017 we discussed 5 ways to beat the ban – including streamlining operations to focus more time on business growth and finding ways of driving additional revenue by offering new products and services to landlords.
We are big supporters of agents and the key role that they play in the lettings market. We have worked with many professional landlords who are very comfortable and successfully navigating the many responsibilities of being a landlord, with many managing their properties themselves with great success. However, there are so many potential pitfalls for landlords to be wary of with countless legislations and compliance issues to handle in addition to headaches such as maintenance and importantly finding and keeping tenants. A good agent can provide all the help, support and protection needed. For more information on the benefits, check out our blog on the importance of letting agents.
Spire Landlord Solutions specialises in providing 24/7 Home Emergency Insurance and Landlord Legal Expenses/Rent Guarantee insurance for letting agents, housing associations and landlords with multiple properties. For further information on our services and how we can add value to your business click here.
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