Under the Tenant Fees Act, which became law in February 2019, letting agents can no longer charge fees to tenants in the private rented sector, and it also caps the amount in deposits tenants must pay.
There are implications for both tenants and landlords, because this act means considerable changes for the private rental market in England and how it operates.
What the Ban on Letting Agent Fees Means
The key measures of the Tenant Fees Act are:
- It limits a tenant’s deposit to the equivalent of five weeks’ rent
- It also limits the amount of a holding deposit to one week’s rent – this is the amount a tenant would pay to reserve a rental property, and is normally non-refundable if the tenant then withdraws from applying for the tenancy
- There will be cap of £50 on charges for changes to a tenancy, unless the landlord can demonstrate greater costs being incurred
- It bans all other letting agent fees, EXCEPT charges for late rent and lost keys.
Letting agents or landlords will also be permitted to charge tenants fees associated with utilities, communication services and council tax.
There are financial penalties for breaking these rules of up to £5,000 for a first offence and £30,000 if the offence is repeated within five years.
What Does it Mean for Tenants?
From groups representing the interests of tenants, there has been a positive reaction.
Their argument is that tenant fees can be unfair, and have led to uncompetitive letting practices.
The government’s own figures suggest that tenants will save around £240 million a year, and a majority of tenants back the changes
What About Landlords and Letting Agents?
Obviously, the reaction here has been far less positive.
Many landlords and letting agents are worried about the implications of a significant loss of income, with tenant fees generating some £700 million, or around 20% of turnover.
One argument is that letting agents will simply pass any extra costs onto landlords, which will then ultimately mean that tenants will end up paying higher rents.
However, there is an alternative viewpoint.
Adding Value to Landlords and Tenants
Criticising the ban on letting agent fees might be missing the point, which is that what letting agents must do, above all else, is offer a good service to both landlords and tenants.
Rather than adding costs, the emphasis should be on adding value.
There are several key ways of doing this.
One is through sound property management services. This means looking after the interests of landlords and tenants by ensuring private rented properties are providing the right kind of accommodation for the right kind of tenants.
Another is to offer landlords the benefits of a guaranteed monthly income. This support landlords by offering them a guaranteed rent, regardless of whether a property is even occupied.
It provides an essential safety net for their business, and helps make letting easier.
For us, as letting agents, what matters most now is looking at how we can continue to deliver a great service to landlords and tenants, combining a professional, capable approach with expert local knowledge.
Regardless of the changes coming in under the Tenant Fees Act, effective from 1 June 2019, letting agents have a vital role to play in helping shape a private rented sector that is fit for the future.
Get in Touch
For more information about easy2let’s expert property management services, including guaranteed rent for landlords, please call 0161 615 4795, email email@example.com or complete our online contact form, and we will be in touch as soon as possible.