Property Market Comment with Steven Sawyer

After the public consultation in 2017, the government last week introduced the Tenant Fees Bill.

The main points are as follows;

• Security deposits must not exceed the equivalent of six weeks’ rent

• Holding deposits will be capped at no more than one week’s rent

• Change of sharer charges will be capped at £50 unless the landlord demonstrates that greater costs were incurred

• Landlords will not be able to issue a Section 21 notice until they have repaid any unlawfully charged fees

• Local authorities will be able to ring-fence any money raised for future local housing enforcement

The only other charges that can be charged for are;

• a change or early termination of a tenancy when requested by the tenant

• utilities, communication services and Council Tax

• payments arising from a default by the tenant such as replacing lost key

The new legislation once passed through Parliament is scheduled for April 1, 2019.

So is this good news for Letting Agents, Tenants and Landlords or are we heading towards a period of turmoil?

Firstly, I think that this is not good news for Lettings agents, though they only really have themselves to blame.

Over the past decade I have noticed agent’s fees increasing as agents have taken liberties to charge what they can get away with as applicants are forced to rent due to overpriced housing costs.

At Sawyers Estate Agents we only charge £160 including VAT for a single applicant and £192 including vat for a couple.

Our fees have not increased in over five years and unlike other agents we do not charge any check in fees, check out fees, Guarantor fees or Tenancy extension fees.

This I consider fair and reasonable.

Yet other letting agent charges including vat typically range from £300 to over £500 for the initial application and extras over the term of the tenancy.

It is these high fees which have caused unrest and bad publicity as tenants unlike Vendors can’t shop around when they are bound by the fees of the agent that happened to have the ideal property they want.

For some letting agents their fees account for 30 per cent of their income, which means staff losses as they are unlikely to be able to make up these fees elsewhere.

Likewise, there is a huge amount of work involved when sharers change, yet to cap this at £50 will maybe deter agents taking on such work.

This is particularly common within the cities where tenants can’t always afford self-contained units.

Turning to tenants, with deposits set at up to six weeks rent, I fear the more venerable are likely to suffer.

Some applicants will struggle to get through the application process, where for example they are unable to provide guarantors.

Turning to Landlords, will agents now have to charge the Landlord for referencing tenants?

What is to stop rogue applicants applying as they have nothing to lose if their application is declined at the Landlords expense?

Will landlords be prepared to consider tenants with complications without adequate security?

Will Landlords seek to increase the rent to pay for the referencing and other fees?

A number of agents use outside Inventory clerks who will still need to be paid by either the Landlord or the agent will need to cover the costs as part of their service.

At Sawyers we already check our own tenants in and check them out and do our own inventory/condition reports in house, to avoid paying third parties.

Though, other agents do not necessarily have the skills and resources to do similar.

To conclude, I see these changes effecting all parties, though not necessarily for the common good.

I would rather have seen application fees retained though capped at reasonable levels as we currently do, as after all, tenants like landlords do receive a service from their letting agent.