What’s New

Manchester Student Accommodation Full Supports the Tenant Fees Bill, banning landlord and agents from charging fees to tenants has now been given Royal Assent and will apply to all tenancies signed after June 1.

The bill – which has now officially become an Act of Parliament – prevent 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.

Once the ban comes into force landlords will mostly be limited to taking payments for rent and deposits from tenants – with rules around the size of the deposits and how they are dealt with significantly tightened.

Deposits will be limited to five weeks, where annual rent is below £50,000 with new, stricter rules on holding deposits.

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. In addition there are two other ‘default fees’ you will be able to charge, if either:

• the tenant loses their keys or
• is late paying the rent.

These fees will also be limited.

Landlords can still charge for a change to the tenancy requested by the tenant, or if a tenant wants to leave early. A full guide to the Tenant Fees Bill is available on the RLA website.

Timeline

The Act will now be implemented on June 1 this year.

The Act applies in England, with plans for a similar ban on tenants’ fees in Wales still being debated.

The ban was announced in the 2016 Autumn Statement – taking many in the industry by surprise.

But with the Tories pledging to support those ‘just about managing’, – Theresa May’s JAMs – and desperate for a share of the youth vote it is perhaps unsurprising. The government said the proposed ban will “stop hidden charges and end tenants being hit by costly upfront payments that can be difficult to afford”.

It also says that the move will bring an end to the small minority of agents exploiting their role between renters and landlords, banish unfair charges and stop those agents that double charge tenants and property owners for the same service.

ARLA branded the move ‘draconian’, however with a report from Citizens Advice last year showing tenant referencing fees in Oxford ranged from £15 up to £360 and a ‘mystery shopping’ exercise in Wales showing the highest fee was 12 times the lowest, there is clearly an issue.

There is an argument that landlords will now have the opportunity to ‘shop around’ – which will force agents to be more competitive.

With the government’s ban on letting fees paid by tenants due to come in on June 1 more and more landlords are questioning whether they should cut out the middle man and ditch their agent to manage their properties themselves. In this article – first published in RLA magazine Residential Property Investor – we look at the pros and cons – and the pitfalls should you decide to take the leap.

Fears that abolishing the tenants’ fees will increase charges to landlords have seen more and more landlords asking whether they need an agent at all, with 70% of landlords questioned in the wake of the announcement saying they are less likely to use an agent in future.

While landlords could, in theory, raise rents to cover any increase in costs, this is a gamble and – in some areas at least – the market will not support it.

This also goes against the whole ethos of the ban, which is to make renting more affordable. Changes to mortgage interest relief, stamp duty and wear and tear allowance mean landlords are already being hit hard in the pocket.

For many, especially those already unhappy with the level of fees they are paying their agent, now may well be the time for change.

So, what do agents charge landlords – and what do you get for your money?
Typically, agents offer three levels of service:

• Finding tenants and establishing the tenancy – often called a tenant find or finder’s fee. The landlord then manages all aspects of the tenancy themselves.

• Full management – a complete package including tenant find, tenancy management and property maintenance, for a percentage of the rent, as well as marketing costs.

• Non-repair or rent collection only – like full management but the landlord handles any repair issues.

Fees differ according to the level of service, the property or properties in question and the agent that you choose, but very generally fees for full management are around 10% of your monthly rental income plus VAT.

If you do opt to stay with an agent then you should always do your homework.

Teresa Galley, director of Doncaster estate and letting agent Galley Properties said a good agent is worth their weight in gold, but you need to make sure you are with a reputable firm.

She said: “It is imperative you make sure you have a good agent. If someone is offering you a deal that seems too good to be true then it probably is. We still hear of agents that aren’t protecting deposits, agents that landlords are having to chase for rent.”

Before employing an agent, ask for a full list of their fees as well as a detailed explanation of what these charges cover.

It is also worth asking whether the agent takes any fees or commissions from its contractors – as some unscrupulous agents can mark-up contractors bills and charge the landlord.

Also look at their reputation. RLA director and property management company director Carrie Kus said: “One of the things I always advise landlords when they are looking for an agent is to ask for a recommendation.

“Ask other landlords who they use and whether they would recommend them, and when you are talking to potential agents ask to speak to some of their existing clients.”

I want to self-manage. What do I need to do?…. Use www.msa4u.co.uk

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