Tenant Fee Ban June 1st 2019
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Great for Tenants - but what about Landlords?
June 1st 2019 heralds a massive change for tenants. No longer will Landlords or Letting Agents be able to charge tenants fees for referencing or applying to rent a property. Obviously this is great for potential tenants, but what about the impacts for landlords?
In simple terms many private landlords will have to pay for referencing the applicants or take the risk of completing the referencing and Right to Rent Checks themselves. If an applicants financial position is not adequately examined before formal referencing takes place this may leave landlords with applicants who fail referencing and no redress to charge the applicants for the expenses incurred in referencing them. This of course equally applies to Letting Agents who previously have charged other costs of the tenancy administration to the tenant as well.
So how can Landlords and Letting Agents reduce the risk of failed refrences?
Every applicant should be pre-assessed before formal referencing is undertaken. Questions should be asked about credit history, terms of employment, and income as a minimum. The applicant(s) should be made aware that providing false or misleading information may lead to their holding deposit being forfeited. Each applicant should sign the pre-assessment to verify the answers provided. This should provide the information for a Landlord to make an informed decision to proceed with formal referencing or not as the case may be.
The Tenant Fee Ban raises a number of other issues:
a) Are Letting Agents going to charge their Landlords higher fees to compensate for the loss of tenant fee income?
We have seen evidence of this already and suspect that in the coming weeks more and more landlords are going to find themselves with an increase in their fees.
b) Are Landlords and Letting Agents going to charge each other for providing references about their current tenants?
This a charge which will have to be met by the applying Landlord as this cannot be charged to the applicant.
c) Deposits are to be capped to a maximum of 5 weeks rent. I
If rent arrears or damages far exceed that amount will there be a rise in court claims against ex-tenants?
Personally I see the positives out of this new legislation:
Renting a property becomes more affordable and therefore there should be a greater pool of potential tenants than previously. Great news for all those parents who still have their adult kids living at home and wondering if they will ever move out!
Introducing a pre-assessment process for applicants not only protects the landlord, but can also be an education process for applicants who financially are just not ready yet to rent their own property, but with additional guidance and knowledge they would be able to do so in the future. Over the years we have had plenty of examples of people who like the idea of renting, but are blissfully unaware of the true costs of running a home that is actually affordable for them.
The restriction on a deposit being a maximum of 5 weeks rent is opening the door to the Nil Deposit' option for tenants which provides greater protection for landlords (the equivalent of 8 weeks rent) but at a lower cost for the potential tenant. We can only see that the Nil Deposit option will continue to grow in popularity as time goes by as we already ahve an 80% take up with the Nil Deposit Option we currently offer.
The ban on charging tenant fees will also help to root out the small number of unscrupulous landlords and letting agents who inevitably will try and ignore the legislation and continue to charge fees which are prohibited.
As the owner of a letting agents which is a family business I certainly do not see the tenant fee ban in a negative way. There are a few challenges as there always is with any change in legislation, but by adopting a common sense approach and enhancing our current working practices the transition post June 1st will be smooth.
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