June 4, 2019
November 23, 2016, was a date to remember for letting agents across England and Wales. It was the date the Tenant Fee Ban was first announced as part of the Autumn Statement. More than 24 months later, the Tenant Fees Bill 2019 has finally come into place. However – and worryingly – many lettings agents and landlords don’t understand the potential impact the act will have.
When looking at the numbers, there are an estimated 4.8 million tenant households in England that are expected to benefit from the Tenant Fees Bill 2019 (Tenant Fees Bill Impact Assessment May 2018). Clearly, this is fantastic news for a nation that is facing an insufferable increase in the cost of living year-on-year.
However, despite expecting this change for more than 24 months, our opinion at GFW on the bill hasn’t changed. As a business, we agree with our regulatory body, ARLA Propertymark, which does not support a full ban. We believe the ban is grossly unfair on honest and reputable agents who charge legitimate fees for work that is conducted on behalf of tenants.
Let’s start with tenant administration charges. Many small agents rely on these fees to continue trading, if they are expected to absorb this cost, regrettably, it is unlikely that they will continue to trade profitably. In order to combat this, we expect many agents to increase their fees to landlords in order to compensate for a loss of earnings. Due to the scope of our work, we’ve made the decision to freeze fees for all new landlords for the next two years.
An increase in landlord fees brings us to the inevitable; an increase in rental rates. It is possible that landlords will increase the rental price of their properties in order to compensate for the additional fees charged by letting agents; essentially contradicting the bill itself and saving the tenant little or no money. Will anyone come out on top? Only time will tell.
Tenant administration charges are probably the most debated section of the bill, however, we must not forget that landlords are now not allowed to charge their tenant for any contracted work as a separate cost, such as gardening or chimney sweeping – potential huge cost implications for landlords.
Given the above implications for landlords, agents, and also tenants, it’s truly my opinion that a cap on fees would have been a far more sensible approach.
Of course, as with any new bill, it is impossible to predict the scale of impact on the industry. If you were to ask us how we think the bill could possibly affect landlords in Newcastle and the surrounding areas, we would say not much. Why? The North East is an area of constant growth, and with more and more funding being allocated to northern towns and cities, there is inevitably more demand for housing; especially for those looking to work in hospitals and education. Higher demand equals higher yields.
The biggest immediate implication for a landlord will be the possibility of their agent increasing their fees; if this is the case, please get in touchto discuss your options or any other queries surrounding the Tenant Fee Ban.
George F. White
0191 605 3480
0191 284 7171