How Could the Tenant Fee Ban Impact Your Letting Revenue, And How To Mitigate Against Loss

As of 1st June 2019, landlord and lettings agents are no longer allowed to charge a number of tenancy fees within England for any new tenancy signed on or after that date. The ban will be applied to all Assured Shorthold Tenancies, student accommodation and licences to occupy in the private rented sector across England.

Applying to both agents and landlords, the ban is extremely wide-ranging and means that landlords and letting agents are solely allowed to take payments for the following relating to a tenancy

  • The rent
  • A reservation deposit (not more than one week’s rent)
  • A refundable tenancy deposit – capped at 5 weeks rent where the annual rent is less than £50,0000 per annum. Where the rent is more than this, a six-week deposit is allowed.
  • Payments to change the tenancy
  • Payments associated with early termination of a tenancy (if requested by a tenant)
  • Payments for utilities, council tax and communication services
  • Default fees required under the tenancy agreement – such as late payment fines)

Which tenancy fees are now banned?
Any fees not on this list are considered prohibited payment and should not be charged, therefore examples of banned fees would then include

  • Credit checks
  • Cleaning services
  • Referencing
  • Admin charges
  • Gardening services
  • Inventories

What does this mean for me as a landlord?
Whether you are using a letting agency, or let directly to tenants, you are likely to see increased costs for every new tenancy. Charges which have typically been paid by tenants, such as referencing fees and shared costs such as inventories and check in fees will no longer be chargeable.

If you are used to taking a six-week holding deposit, the reduction to 5 weeks, could have an adverse effect in the case where there are serious dilapidations or rent arrears as there is less to claim from. Additionally, where previously a higher deposit may be offered in cases for example where a tenant may wish to have pets or falls slightly short of your referencing criteria – this will no longer be allowed.

How can I mitigate any loss from the tenant fee ban?
While there is, of course, an expectation that rents will rise, rental amounts are only as high as the market is willing to bear, therefore choosing the right letting agency can help to ensure that you achieve the best possible rent.

Additionally, increasing tenant retention, by getting the best possible tenants who wish to stay within your property for as long as possible will reduce the number of times that you have to endure the costs associated with a new tenancy.

If you are using a lettings agency, it is imperative that they communicate their terms and conditions after the ban. Lettings agents have suggested that the ban could impact on their revenue by up to 20% – which is likely to be attempted to be recouped somewhere – most likely from you!

However, at Benoit Lettings, this is not the case, as director Matt Lavin states, “We welcome changes that make the private rental sector a more fair place to be for tenants. Our business structure has never relied on any income from tenant fees, instead, we take offering excellent service and obtaining the best possible rental income from our landlords very seriously”.

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