After the Tenant Fees Bill received Royal Assent last week, landlords and letting agents will, from June 1st 2019, no longer be able to charge fees to set up or renew a tenancy in the private rented sector, but are you prepared for the changes?
The new law will not just mean a ban on letting fees, but also the majority of other upfront fees payable by tenants to rent a property in England.
There will also be a cap on the amount of refundable security deposit a tenant would be required to pay to the value of five weeks’ rent as well as a cap on the amount of holding deposit a tenant will be required to put down to secure a property to the value of one week’s rent.
The government believes that the Bill will make renting properties in England fairer and more affordable for tenants by reducing the costs at the outset of a tenancy, but the fees ban will undoubtedly have a multitude of effects on landlords.
To help prepare for the changes, Andrew Turner, chief executive at specialist buy-to-let mortgage broker Commercial Trust Limited, offers the following advice:
Don’t lose good tenants!
Many tenants may treat the news of the impending Tenant Fees Bill as good news and an opportunity to review their existing living arrangements.
As a landlord, you may not want to lose good tenants, particularly if they are reliable, pay their rent on time and keep your property clean and in good condition.
By opening dialogue with tenants, you may be able to ascertain if they are happy with their present living arrangements or if there is anything they are unhappy about. That gives you the opportunity of remedial action.
Be prepared for legal changes
From June 1st, there are a range of fees that agents and landlords will no longer be able to charge tenants for.
If you charge one of the banned fees to an existing tenant after this date, you will be unable to serve a valid Section 21 notice until you have provided a full refund of this charge.
Furthermore, it would make sense to review your existing contract templates ahead of the Ban and to update these, to ensure they do not include clauses that will no longer be valid, pertaining to outlawed fees.
Speak to your letting agent
Many letting agents may still be disseminating the fall-out from the Tenant Fees Bill, but for most, the main points banning tenant fees, have been known of for some time.
If you use a letting agency for services, it may be prudent to have a conversation with them to establish if their charging structure is going to change, or if they intend to amend the services they supply.
It is worth asking how new technology might change the relationship, as several agencies are looking to deploy software to streamline their services and save costs. But, is that going to suit you as a landlord and will you receive the same level of service you have become accustomed to?
The bottom line for most landlords is going to be whether agents make up any shortfall in revenues, as a result of not being able to charge tenants, by adding costs to landlord services.
It is worth fully investigating whether you are going to face higher costs – and just to clarify, you might also want to speak with a tax specialist to understand which agent costs are tax deductible. This might in the long run save you having to hike rents, particularly if you are keen to keep your existing tenants.
Looking to secure a rental property ahead of a possible June 1st rush?
If you are thinking of investing in buy to let, for the first time, or as a portfolio landlord or you are looking to remortgage, it might be worth starting the process as soon as possible.
It can take time for a buy to let mortgage application to complete its process, no two cases are the same.
The only certainty is that the longer you leave it, the less likely you are to have a property ready to let out, ahead of any possible surge in tenant demand.
As I always say with buy to let investment, it is worth investing the time in planning ahead, to ensure things run smoothly.