Posts with tag: letting agents

Tenant Fees Ban Could Mean Landlords Opt to do Without Agents, says NLA

Published On: May 31, 2019 at 9:29 am

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Tenant Fees Ban Could Mean Landlords Opt to do Without Agents, says NLA

With the Tenant Fees Ban coming into place tomorrow (1st June 2019), the next few months could present a challenge to letting agents, as they work to recoup costs that they’ll no longer be able to claim from tenants.

The Tenant Fees Ban is designed to shift the costs of renting from tenants to landlords. However, doubts about how well the ban is likely to work include the possibility that many landlords will avoid incurring the extra charges by increasing rents, or not employing a letting agent, and dealing directly with their lettings themselves.

The National Landlords Association (NLA) is concerned tenants may be limited from properties in areas with selective licensing. Most selective licensing schemes require landlords to complete reference checks, and if tenants are unable to satisfy these checks, landlords will be unable to let properties to them without being in breach of the conditions of their selective licensing.

Richard Lambert, CEO of the NLA, commented: “Tenants are at risk of losing out on the chance to find a home because letting agents are doing everything they can to minimise workloads to cut down on costs.

“While landlords who self-manage their portfolios will be covering many increased in costs, letting agents are looking at any way they can limit what they have to do on behalf of tenants, now that the costs cannot be directly recovered.

“The smooth running of the housing market requires a little give-and-take and, unfortunately, the reaction of some letting agents to the ban on most charges looks set to throw-up more barriers to moving from one tenancy to another.”

“Just like private landlords, letting agency businesses are being put under increasing pressure by government regulation. However, they must realise that penalising outgoing tenants by refusing to provide references will ultimately cost them more than just the price of a reference as landlords opt to do without agents altogether.”

Preparing for the Tenant Fees Act – Everything you Need to Know

Published On: May 30, 2019 at 10:14 am

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Categories: Law News,Tenant Fees Ban

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On Saturday, the Tenant Fees Act will come into force, meaning certain fees associated with letting a property in the private rental sector will be banned.

On Saturday (1st June 2019), the Tenant Fees Act will come into force. This means that certain fees associated with letting a property in the private rental sector will be banned.

Alexandra Morris, the Managing Director of MakeUrMove, has shared everything that you need to know about the Tenant Fees Act, how the law will affect landlords, and how you can be prepared ahead of its introduction this weekend.

Why is the Act being introduced?

The Government’s aim is to create a fairer and more affordable private rental sector. The Tenant Fees Act is just one measure the Government is taking to overhaul the industry, and to improve the relationships between landlords and tenants.

The Tenant Fees Act will apply to all Assured Shorthold Tenancies (ASTs) in England’s private rental sector.

Which fees will be banned?

Fees for viewing properties, setting up tenancies, check-out and third party fees will all be banned under the Tenant Fees Act.

  • Viewing: You cannot charge a prospective tenant for viewing your rental property.
  • Tenancy set-up: All costs associated with referencing, credit checks, guarantors and administration have to be covered by the landlord. The only exception is if a tenancy agreement began before 1st June 2019, stating that certain fees have to be paid, for example, renewal fees.
  • Check-out: Landlords can only charge tenants check-out fees if their tenancy was agreed before 1st June 2019. Otherwise, you cannot charge your tenant for tasks such as a professional clean of the property at the end of the tenancy. While a tenant is responsible for cleaning the property to the same standard as it was when they first moved in, if the property requires cleaning, then the costs must be supported with evidence and claimed through the tenant’s deposit.
  • Third party fees: You cannot charge a tenant for acquiring fees from a third party, such as reference checks, credit checks, insurance, gardening services or guarantors. The landlord must pay any costs associated with third parties.

Which fees can still be charged?

The only fees that landlords and agents are able to charge tenants from 1st June are: rent, a security deposit, a holding deposit, changes to the tenancy agreement, early termination of a tenancy, payments associated with utilities, broadband, a TV licence, Council Tax, or loss of key, and a default fee for late rent payment.

However, there are restrictions within these accepted fees:

  • Rent: This amount should be agreed before the tenancy agreement is signed. The monthly rent should be the same amount for each month of the tenancy. Landlords are only able to change the monthly rent through a rent review clause for a permanent increase or decrease in rent.
  • Security deposit: This must be no more than the equivalent of five weeks’ rent. If the total annual rent of the property is more than £50,000, then the deposit can be the equivalent of six weeks’ rent.
  • Holding deposit: This is limited to the equivalent of five weeks’ rent. However, you can only accept a holding deposit from one prospective tenant and you can no longer advertise the property after you receive the payment. The holding deposit has to be repaid following the tenant agreeing to the tenancy agreement. If the landlord chooses not to let the property to the prospective tenant, or if an agreement isn’t reached within 15 days after receipt of the holding deposit.
  • Changes to the tenancy agreement: If a tenant requests a change to the tenancy agreement, you can charge up to £50. However, if the associated costs could be higher than £50, then you’ll have to show evidence of the potential costs you would incur.
  • Early termination of a tenancy agreement: This is based on financial loss and reasonable costs incurred. Generally, this means that the amount should not be more than the amount of rent you would have received if the tenant had followed through with the tenancy until the end of the agreement.
  • Payments associated with utilities, broadband, TV licences and Council Tax: This depends on the individual tenancy agreement, but tenants are generally responsible for paying these fees.
  • Replacement or default fees: This has to be already written into the tenancy agreement in order for a landlord to charge for late payment of rent or the loss of a key. Late payment of rent is classed as more than 14 days overdue. The fee should also not exceed 3% more than the Bank of England’s annual percentage rate for each day the payment is outstanding or costs incurred.

How are current tenancy agreements affected?

If a tenancy agreement was agreed before 1st June 2019, then you will still be able to charge the banned fees, if they are already included in the tenancy agreement.

From 1st June 2020, the Tenant Fees Act will apply to all tenancies.

You should also note that, if you have charged a tenant for any of the banned fees for a tenancy agreement entered into after 1st June 2019, then you would be unable to use Section 21 powers, should you need to evict a tenant. You will have to repay the unlawful fees in order to use a Section 21 notice.

What are the penalties for a breach?

The fine for breaching the Tenant Fees Act will be a civil offence, with a fine of up to £5,000. However, if a landlord makes another breach within five years of the first fine, then the breach will be classed as a criminal offence instead. If you commit a criminal offence, you could face prosecution or a fine of up to £30,000.

Landlords who receive two or more financial breaches in one 12-month period or commit a criminal offence may find themselves on the rogue landlord database.

Only the Best Letting Agents will be Valued by Landlords Post-Fees Ban

Published On: May 29, 2019 at 8:54 am

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Categories: Lettings News,Tenant Fees Ban

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Letting Agents could Benefit from Build to Rent

Following the introduction of the Tenant Fees Act next month, landlords and tenants will increasingly focus on the level of service provided by the country’s best letting agents, believes Tenant Shop.

The utility management service says that, due to the financial pressures that the ban on fees will put on letting agents, only the best equipped will succeed, as we move through the second half of 2019 and into 2020.

In a post-fees market, letting agents that take a traditional approach, with a focus on high levels of customer service, will be of huge value to landlords, Tenant Shop claims.

With tenants no longer paying upfront fees from 1st June 2019, it will be essential that agents help landlords to properly vet prospective tenants and ensure that all aspects of the move-in/move-out process – including notifying local councils and utility companies about tenancy changeovers, and dealing with stray bills – are handled professionally and efficiently.

Glenn Seddington, the Managing Director of Tenant Shop, says: “The introduction of the Tenant Fees Act is the most significant change to the private rental sector in recent years, and landlords will need full service traditional letting agents they can rely on.

“Having the right tenant referencing, contractual and deposit systems in place will become even more important, as will remaining compliant with the new legislation.”

He continues: “Letting agents can also prove their worth to consumers by providing a comprehensive, knowledgeable and personal service at a time of huge industry change, when people will need reassurance and expert advice.”

As many landlords consider their options following management fee increases brought about by the fees ban, agents can make their offerings stand out, by clearly showing the range of expert services that they provide for their fees.

“It’s this kind of approach with an emphasis on full service and demonstrating the value for money available to landlords, which will see the very best traditional agents take centre stage once the fees ban becomes law,” Seddington explains.

He adds that while, in some cases, management fee increases may be justified, agents don’t necessarily need to hike their fees to remain profitable from June onwards.

“It’s about finding a balance between charging a fair fee for what you offer, while remaining transparent and cost-effective,” Seddington says. “Many agents have also been looking to build additional revenue streams to replace lost fee income.”

He concludes: “Working with the best suppliers can help agents to earn referral fees and, subsequently, keep clients’ costs down. Meanwhile, providing access to leading utilities services, such as Virgin, Sky and Scottish Power, can also help to keep tenants happy, encourage them to stay for longer and, therefore, reduce void periods for landlords.”

All Parties must do their Research on Deposit Replacement Schemes, Proptech Provider Urges

Published On: May 28, 2019 at 9:40 am

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As alternatives to the traditional deposit protection schemes continue to gain popularity, it’s important for landlords, letting agents and tenants to fully understand how these systems work, before committing to using them, PayProp insists.

Deposit replacement schemes, sometimes referred to as zero deposit schemes, require tenants to pay a non-refundable fee of around one week’s rent, instead of the more traditional upfront, refundable security deposit (which will be capped at five weeks’ rent under the Tenant Fees Act).

The tenant’s fee is used as an insurance guarantee, which landlords can claim compensation for in the event the tenant is responsible for damage to the property. After compensating the landlord, the deposit replacement scheme will then recover the costs from the tenant directly.

Recent research from Your Move suggests that tenants are increasingly interested in alternatives to traditional upfront deposits.

Some 50% of almost 4,000 adults surveyed said that they were interested in alternative or insurance-backed schemes, while 70% said that having the choice to pay an upfront deposit scheme would influence their decision on whether to rent a specific property.

Over half of those taking part in the study were aged between 25-44-years-old with children at home, or private tenants aged 45+.

All Parties must do their Research on Deposit Replacement Schemes, Proptech Provider Urges

Neil Cobbold, the Chief Operating Officer of PayProp, says: “It’s clear that tenants’ awareness of deposit alternatives is growing, and many are interested in how the system could work for them and they could soon become a key piece of criteria for some movers.

“This means now is a good time for letting agents and landlords to carefully consider the options available to them, including the range of different providers and product variations now on the market.”

With more providers offering deposit alternatives and an increasing number of letting agents promoting these products to consumers, it’s important that agents who haven’t yet entered the market get to grips with what they’d be offering landlords and tenants, and how the system works.

Cobbold explains: “Some of the key things agents need to look out for is the product’s level of cover and who the insurance policy is underwritten by.

“It’s also vital to consider how deposit alternatives fit into the tenancy process and how the system will work at the end of a tenancy if the landlord wants to charge the tenant for damage or missing items.”

Providing more choice is a necessary step in catering to a growing, increasingly diverse population of private tenants.

“Upfront deposits may not be as much of an obstacle for the higher number of older tenants and family renters living in the private rental sector, who may also prefer to put aside a larger sum of money for the duration of their tenancy, which they can get back at a later date,” says Cobbold. “That said, for those who find sourcing funds for a traditional deposit a moving deterrent, alternative products are a welcome addition to the marketplace.”

He continues: “It’s also very important for tenants to do their research and think about what is best for their circumstances.

“A small upfront fee and subsequent insurance policy may seem more appealing, but it might not always be the best option in the long-term.”

Cobbold concludes: “Whether you’re an agent, landlord or tenant, it’s essential to do your research to make sure your aware of the benefits and drawbacks to deposit alternatives. The new choices available can only be a good thing if everyone involved fully understands what they are agreeing to.”

Half of Landlords and Agents More Likely to Leave Sector under Government Plans

Published On: May 23, 2019 at 8:00 am

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Almost half (46%) of landlords and letting agents are more likely to remove some or all of their investments in the private rental sector as a result of the Government’s plans to abolish Section 21 notices.

The findings come from a new survey by the Residential Landlords Association (RLA) of around 6,500 landlords and letting agents – its greatest ever response. 

The study also found that more than 40% of landlords are waiting for other planned changes by the Government to become clearer, before they make decisions on their ability to provide homes to rent.

These figures arrive just weeks after the Royal Institution of Chartered Surveyors (RICS) warned of private rent prices increasing by an average of 3% per year over the next five years, as a result of landlords being less prepared to let properties, while demand from prospective tenants rises.

In April, the Government announced plans to end Section 21 evictions, alongside proposals on improving the Section 8 process, under which landlords can repossess their properties on grounds such as rent arrears or anti-social behaviour. This procedure requires landlords to apply and be granted permission to repossess via the courts, yet official data shows that it takes over five months on average from application to repossession.

Half of Landlords and Agents More Likely to Leave Sector under Government Plans

According to the RLA’s survey, of those landlords with experience of such repossessions, 79% did not consider the courts to be reliable. Almost 91% of landlords supported the establishment of a specific housing court, bringing together all housing disputes under a single body.

With concerns that landlords selling property will usually require tenants to be evicted, the RLA’s research revealed that 48% of respondents would be encouraged to purchase a rental property with a tenant in situ, if they could reclaim the 3% Stamp Duty surcharge on additional homes, on the condition that the tenants can remain in the property for a year or more.

The survey also found widespread support for new grounds to be established upon which landlords could regain possession of a property. This included, to sell a property and to ensure that tenancies can best meet the needs of certain groups, such as students, who do not require the indefinite style tenancies being proposed by the Government.

David Smith, the Policy Director of the RLA, says: “Security of tenure means nothing unless the homes to rent are there in the first place. With the demand for private rented housing showing no signs of slowing down, it is vital that landlords are confident that they can quickly and easily get back their property in legitimate circumstances.  

“Whilst the system should clearly be fair to tenants, it needs also to support and encourage good landlords. Our survey shows how complex it will be to ensure that the grounds on which landlords can repossess properties are both clear and comprehensive. This needs to be underpinned by a court system that is fit for purpose and properly resourced. At present it is neither.”

He adds: “It is vital that the Government’s planned reforms are carefully considered, to avoid finding ourselves needing to reopen this whole issue later down the line.”

Is it Time to Regulate the Property Industry?

Published On: May 20, 2019 at 9:26 am

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Tenant Fees Ban Could Mean Landlords Opt to do Without Agents, says NLA

By Paul Mahoney, the Managing Director of Nova Financial Group 

With over two million landlords owning over five million properties in the UK, which generate over £50 billion in rent per year and is worth over £1.5 trillion, is that not a market worth protecting from under qualified, and quite often very misleading advice and guidance from unscrupulous and sometimes incapable individuals?

The fact that you can be a concreter one day and an estate agent the next without any qualifications and be viewed as an expert in your field really concerns me! (Nothing against concreters, it’s just the first example that came to mind). 

Property is generally one of, if not the, biggest purchases we as individuals ever make, and, even if we’re building a portfolio and buying many of them, it’s still a very big decision every single time that should not to be taken lightly.

With all of the recent changes in the market with regards to finance, tax, management etc., I say very confidently that property is not a do-it-yourself (DIY) activity anymore. Property is also not a hobby; it is a business that requires an understanding of your current situation, your goals, a strategy for achieving them and careful implementation of that strategy, as well as constant revision of the right strategy at various points in time.

Even before the changes, it used to shock me how many landlords I’d meet with that had done everything themselves on quite on an ad hoc basis, without seeking much advice or guidance at all. An analogy I often use for this is, if you jump in your car to drive to a destination, but don’t know how to get there or have a map, then you’re very unlikely to get there. Also, if you don’t know what your destination is, then you’re quite unlikely to end up somewhere desirable.

Is it Time to Regulate the Property Industry?

Fair play to those that have done well without much planning, but, in my humble opinion, regardless of how intelligent or cunning you are, you can always benefit from qualified professional advice, whether that be for someone to hold your hand every step of the way, or just to use them as a sounding board and extra resource, over and above your limited resources as an individual. We as individuals only have so much time, knowledge and experience – we’re limited by those factors, whereas the right business that provides specialist advice in certain areas will generally have those resources in abundance compared to any one person, and good advice is worth paying for to help you plug the gaps in your resources. What’s difficult in the property industry is to know who to go to and who to trust for that advice and guidance.

I hate to be the whinging expat, but, in Australia, which is where I am from originally, estate agents need to do the following as a minimum to be involved in the lettings, management, purchase or sale of property in any way:

  1. Complete a qualification and certificate of registration
  2. Gain experience working under a licenced estate agent
  3. Gain their own licence to operate independently 
  4. Go through criminal record, and fit and proper tests 

This doesn’t necessarily mean that everyone that becomes an estate agent in Australia is a saint, but it does ensure they somewhat know what they’re talking about (due to the qualifications and experience) and keeps out some of the people that shouldn’t be in the industry.

In summary, I’m a strong believer that the property industry could benefit from more qualification and registration requirements to raise the standard of professionals in the industry, and give landlords and prospective landlords more confidence in those that they’re dealing with, and more guidance on who to deal with.