Tenant Fees Ban

252: What does the tenant fees ban mean for landlords in England?

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Tenant Fees Ban
Two years after it was first announced, it was revealed this week that the tenant fees ban will eventually come into force on 1st June. In this week’s podcast we ask what it means for landlords?

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What is the tenant fees ban?

The tenant fees ban makes it illegal for landlords, agents and property management services to charge people additional fees for the setup costs of a tenancy. In other words, it is no longer possible to charge tenants for the cost of things such as referencing, inventories, credit checks and right to rent checks.

Any landlord or agent in breach of the ban risks a £5,000 fine. Landlords falling foul of the law will also be banned from issuing a section 21 notice on tenants living in the affected property.

What can still be charged for?

Before taking a look at the impact the ban is likely to have on landlords and letting agencies, it’s worth considering what charges are still allowed. The first and most obvious is rent. Security and holding deposits can still be demanded, but the latter is now capped at a week’s rent. It is also within a landlord’s rights to charge interest on rent arrears and charge for variations to a tenancy agreement. Charges for variations are limited to £50 or reasonable costs. It is also still fine to charge for bills on tenants’ behalf.

How will the ban affect landlords and letting agencies?

The Association of Residential Letting Agents (ARLA) say that the fees will cause a 20% reduction in revenue for the average landlord and letting agent and predict 1000 agents will close. 87% of agents surveyed by ARLA think rents will increase, with two thirds of them saying they intend to pass on the extra costs to landlords.

What can landlords do to offset the costs?

The first and most obvious response is to increase rent. Landlords may also want to try and increase tenant retention, to reduce the amount of times they have to endure the costs of referencing. Otherwise, landlords may want to consider charging for rent arrears and tenancy agreements if they don’t already. These additional streams of potential revenue can provide some protection against the ban’s financial blow. Larger portfolio landlords may be able to recuperate some of the extra expenses by selling additional services such as cleaning.

Read the bill in its entirety:

publications.parliament.uk/pa/bills/lbill/2017-2019/0152/18152.pdf

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