As I’m sure you’ve heard in the news recently, the Government is planning to move forward with the proposed plans to ban fee’s for tenants. The legislation is still in draft form, so there is plenty of time it can still change, but here we discuss the main points which we don’t believe will be altered too much. Scotland banned tenant’s fee’s way back in 2012, and Wales are also taking steps to ban tenant fees.
· The ban applies to both private landlords and letting agents
· Fee’s will be banned for all tenants and anyone acting on their behalf, such as a guarantor or parent.
· There are a few exemptions though, these include- holding deposits, rent, deposits and charges for any defaults on the contract e.g. tenants losing their keys and needing a new set or tenants defaulting on their rent payments and a reminder letter is sent – however any charges must be reasonable, and evidence of any costs incurred must be provided by the landlord/agent
· Holding deposits will be capped at 1 week’s rent and subject to statutory legislation with regards to repayment
· Deposits will be capped at 5 week’s rent
· The ban will also include setting a higher rent for first portion of the tenancy and then reducing it afterwards to prevent landlords/agents from offsetting the cost of the ban.
Why is the government planning on doing this?
The government believes that the current system makes it too expensive for tenants to rent a home. Currently tenants may have to pay holding fees, reference fees, admin fees, security deposits, upfront rents, and many more charges before they even move into a property. This can result in tenants having to save thousands of pounds which can prove to be extortionately expensive. Some agencies/landlords then charge ridiculous amounts during the tenancy, which we agree is unfair and wrong.
As letting agents, we hear and can see valid points on both sides of this discussion. Some landlords are concerned that the capping of deposits to 5 week’s rent will mean that tenant damage to a property may exceed the deposit amount and then court proceedings would need to take place to recover the rest. This could then also result in tenants with poor credit ratings or previous CCJ’s being less likely to be accepted as tenants.
Tenants with pets may find it becomes increasingly difficult to find a landlord willing to accept them; some of our landlords request a larger deposit to cover any potential damage a pet may cause to carpet or furniture etc. With the deposit amount capped, they can no longer ask for this and may see it as a risk that they aren’t willing to take. In our previous blog post; To Pet or Not to Pet, we discovered that 26% of households are pet owners, and this is a lot of people that are no longer desirable as tenants.
Landlords also worry that the tenant fee bans are an added expense, to the already long list which includes the changes to additional HMO licences in Bath (see previous blog ‘BANES HMO Changes’), changes to planning permission rules, application costs for HMO’s, and tax changes relating to a landlord’s income. This could result in many landlords concluding that renting is no longer economical, which could see a rise in landlords selling their rental properties, leaving a more competitive market for tenants. On the other side of this, it could mean the sales market is flooded with properties, meaning more opportunity to buy.
If we look to Scotland as an example of the tenant fee ban, we find a negative one for us as agents. Many agents in Scotland couldn’t survive the loss of income, with this causing a concussive effect to other sectors such as inventory companies, property photographers and referencing companies. The professional industry generally has a negative view on the fee ban and have suggested that capped and clearly displayed tenant fees are a better solution to the problem. We will post updates on this issue as and when the bill progresses.