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Michael Moore’s Newsletter Editorial – An Update Following The Introduction Of The Tenant Fee Act

17th October 2019

We are now some months on from the introduction of the Tenant Fee Act, which if you recall, banned landlords or estate agents charging tenants any application fees or referencing costs when applying for a tenancy. It also restricts the level of any deposit and limits what a landlord can charge a tenant for during and at the end of the tenancy. A breach of any of the limits in the Act will see the landlord or agent severely penalised and will significantly undermine the landlord’s ability to obtain vacant possession via the courts should the tenant refuse to leave.

I had forecast earlier in the year that this new legislation would inevitably lead to abortive applications (tenants would offer on multiple properties but only proceed with one, losing little if the allowable reservation fee was tens of pounds rather than hundreds), increased fees for landlords but also increases in rents.

Within the geographical areas we operate the latter two predictions have come to pass. Landlords are paying higher fees for agents to find tenants and set up new tenancies, but with tenants having much lower upfront costs when applying for properties, rent levels have increased. In over 90% of our new tenancy set-ups this summer the higher rent levels have more than covered the landlord’s increased costs. Ultimately, if tenants don’t move from property to property too often, the tenant will pay more for their rented accommodation than they would have done under the old regime, and the landlord will make more profit. This outcome was not the Government’s intention; the objective was to reduce the cost of renting for tenants. Many agents, including myself, wrote to our trade bodies (Propertymark ARLA & Safeagent) as well as our local MP voicing our concerns and proffering our speculations; we were ignored.

Despite a significant increase in abortive applications nationally, Moores statistics is showing only a marginal increase in abortive set-up’s. The data I have access to doesn’t give me sufficient information to analyse the detail, but I speculate that Moores interviewing of prospective tenants is more in-depth leading to a better tenant selection process. Many multi-branch agencies, and letting agents who focus on Let-Only/Tenant Finding rather than Full Management focus on signing-up anyone interested in a property simply to secure their commission fee, irrespective of whether the applicant is committed or indeed suitable for the property concerned. Where we are offering a fully managed service we don’t want our time wasting, nor do we want a tenant who doesn’t pay the rent on time, abuses the property or creates social issues, all of which are time consuming to manage and ‘eat’ into our profits. The more efficient, and per se selective, we are at the start, the smoother will be the tenancy and the happier the tenant and landlord.

Government made changes to legislation this summer. Two changes were made to the ‘How To Rent’ Guide which Landlords must serve on tenants prior to the start of the tenancy but they did not update the Guide on the Government website – serve the wrong Notice and you could forfeit the right to recovery of your property.

A further change to Section 21 and the Form 6A Notice was made. This was published but in fact this has been declared invalid as Form 6A is prescribed by statute and can only be amended by a Statutory Instrument (are you keeping up?) therefore if you’re a private landlord please do not use the Form that’s on the Government website!

Now we’re awaiting the finalisation of the abolition of Section 21 and see what changes are being introduced to Section 8 to obtain vacant possession. The next 6 – 12 months will be interesting, as landlords and tenants settle in to even more changes to the Private Rented Sector. I can only see rents going one way – up!

  • Bramhope
  • Headingley
  • Hyde Park

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