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The Tenant Fee Ban 1st June – Advice for Landlords

By Michael Alan Sears   MNAEA   MARLA   ANAEA (Comm)   HIDip   NDea

On 1st June 2019 the Tenant Fee Ban becomes Law. Essentially it means that Landlords and Letting Agents will no longer be able to charge any fees to tenants which include reference fees, agreement fees, key fees, inventory and check-out fees etc. It also limits a deposit to five weeks and is retrospective, meaning all current levels of deposit held over a five week total may need to be repaid to the tenant.

It is essentially a piece of consumer driven legislation that is long overdue. Certain agents have been charging the bulk of fees to tenants – sometimes fees upwards of £700 – and understandably this was a measure the government was always going to be pressurised into taking by consumer lobbying groups.

The current average length of an assured shorthold tenancy in England is around 26 months, but Landlords should expect this to dramatically shorten in the next few years. The reason to date why tenants have not moved more often has been the cost. With the tenant fee ban, suddenly as of 1st June tenants will far easier be able to afford the costs associated with moving and, to this end, the standard of accommodation and speed with which a Landlord and his agent carries out repairs and maintenance will determine how long that tenant stays.

In all of this there is a hidden very real RISK to Landlords, potentially far more damaging than the length of average tenancies shortening. The risk is in using an unregulated estate agent or letting agent. If you choose one that is regulated by either ARLA (The Association of Residential Letting Agents), the NAEA (The National Association of Estate Agents) or RICS (The Royal Institute of Chartered Surveyors) you can rest assured that these agents have independently audited client money accounting systems in place with client money insurance protection.

The RISK is in not choosing a regulated agent. Imagine an unregulated agent suddenly losing its tenant fee income and, in addition, having to pay back all deposits held of more than five weeks rent. To make up the shortfall in lost tenant fee income either the agent would need to magically muster up a huge new volume of property to let – or substantially increase its Landlords fees, potentially alienating their existing client base. All of this is the slippery slope to this agent borrowing against client monies (ie Landlord rents) and eventually going out of business.

In the past five years in Gravesend three agents have gone out of business – two of which took all client monies with them including Landlord’s rents and deposits. I spoke to one Landlord who, having lost six months rent, also had to pay the tenant their deposit back (even though the agent had held it) because he was party to the tenancy agreement. My advice to Landlords who are receiving rent late is to consider switching to a fully regulated agent and, in fact, my own agency has already seen several new Landlords coming over to us and the safe haven of an ARLA agent in recent months.

 

Sealeys were the first estate agent in Gravesend to not charge fees to tenants in April 2019, ahead of the tenant fee ban on 1st June. Sealeys are a fully regulated agent as members of ARLA and NAEA. Sealeys celebrate 26 years in business in May this year.

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