The times they are a changin’. Bob wasn’t warbling about the world of the property, but it’s a mighty appropriate song to sing to landlords when all the recent attacks on this profession are totted up. Along with the slashing of tax relief for mortgage interest payments, surge on steam duty, a proposed scrapping of Section 21’s, today sees the banning of fees imposed on tenants. Is this a good or bad thing?
What’s actually changing? Well, as of today, rental agencies and landlords can no longer charge tenants:
- Any administrative or credit check fees to commence a new tenancy, that means no admin, referencing, paperwork, weekend visits, check in/out or other spurious charges.
- More than £50 for making a change to a tenancy agreement during the tenancy
- A deposit which consists of more than five weeks rent, (total annual rent divided by 52 and times by 5), as long as the total annual rent is under £50,000.
- If the rent is over £50,000pa, the deposit is capped at six weeks.
- A refundable holding deposit (to reserve a property) of more than 1 week’s rent, and the tenancy agreement has to be concluded within 15 days of receipt.
- Any mid-tenancy default fees other than a reasonable amount for a lost key or entry card…
- …or for late payment of rent (it must be at least 14 days overdue), with interest charged not exceeding the Bank of England base rate plus 3%.
- Anything other than payments in respect of utilities, communication services, TV licence and Council Tax
- Unreasonable early termination fees if requested by the tenant. These must be “capped at the landlord’s loss or the agent’s reasonable incurred costs,” says the government.
- Renewal fees on new tenancies entered into after 1 June 2019.
If they/we break these new rules, then landlords or agents found to be charging illegal fees can be fined up to £5,000 for a first offence. If they break the rules again within five years, they face an unlimited fine. Wow.
You know what, I’m not bloody surprised this has happened. I’ve been a hands on, local to my property landlord since 2001. That’s 18 years at the rental coal face. I used an agent to manage my very first flat, bought on a B2L mortgage and completely renovated from a hovel to a lovely home. The agents were bobbins. I changed to another one. They were rubbish too. Ignoring my tenants, not getting to grips with maintenance, charging them unjustifiably fees for a poor service. I became, not necessarily through choice, a self-managing landlord. Rental agents have brought these onerous changes onto themselves by not properly regulating themselves and by default onto self managing landlords too. The latter generally charge far lower and more reasonable fees and give a better service. It makes me quite mad.
We used to charge a £260 admin fee, which covered everything from the advertising, credit check, admin time, inventory and deposit insurance securing. If we hadn’t advertised, and we sometimes didn’t need to as we benefit from word of mouth when our tenants move on, that would drop considerably. We felt, and our tenants felt, that was pretty reasonable and most costs were swallowed up in the business as opposed to being passed on. Over my time as a landlord, we’ve had over 150 sets of tenants, and never once has anyone queried this admin fee. To each tenant, it was a reasonable sum, happily accepted. In total it adds up to a £39,000 extra cost to the business. Bear in mind the business doesn’t actually make a profit, due to appalling management by the RBS pre-crash and the fact that it’s supposed to be a pension, ensuring the state doesn’t need to subsidise me and our family when I retire. And now, thanks to greedy agents milking the system, those quite justifiable running costs are banned.
I’ve read all the Generation Rent promo and Guardian articles, and they’re mostly moaning about bloody London. Whether downright greed or a need to cover their own high business costs, the ridiculous level of fees levelled at city tenants or tenants who are less able to fairly argue their own case, have resulted in this rather one sided legislation.
The Government and councils don’t want the financial responsibility of cracking down on rogue landlords and agents, so making it easier and cheaper for tenants to up and move does make some sense. For example, if a landlord won’t fix a faulty boiler, the tenant is no longer hammered with expensive agency fees to simply pack up and move – this is good.
However, it’s not just the exorbitant fees which have been banned. It’s the perfectly reasonable ones too. And not only those.
As says the Guardian “Gone are the £300-plus admin fees and the £100 credit-check fee, the hefty extra charge if you want to keep a cat, or the steep surcharge to move in or out on a Saturday” Hang on a minute – the hefty extra charge if you want to keep a cat? I covered this topic here but in brief – why shouldn’t a pet owner take financial responsibility for their animal? If there is going to be no damage to a property which essentially is not the tenants, then an increased bond should not be a problem.
Unfortunately however pets do cause damage and problems, it’s a plain and simple fact (and I say that as a cat loving owner of two adorable rescue cats, one of whom barfed up ginger vom on the sofa last night). If you own a your own home and your pet gets fleas which infest the carpet, you pay to eradicate them. Why should a landlord have to pay for your pet’s fleas?? Why is this shunting on of basic adult responsibility seen as a good thing??
I’m not convinced about the five week deposit either. Not all tenants are good tenants. The lion’s share of ours have been completely brilliant but about 3 in over 150 have been horrid. Shitty tenants know that if they’re leaving and don’t bother paying the final months rent, it’s taken from the deposit. If they only owe that, obv. We used to take six weeks deposit, because then that ‘left’ a further two weeks to cover any damage to the property or cleaning costs. Seemed sensible to me. Was rarely needed though and the vast majority of tenants didn’t end up losing any of their deposit. Most pay a small amount in cleaning fees as the majority of Millenials can’t clean for toffee.
I don’t understand the 15 day limit. Often we show a property as soon as the exiting tenant gives their month’s notice. That means the new tenant viewing sees the property four weeks before they are due to move in, and pays a fee to secure it, offset against their deposit. Why has a 15 day rule been imposed? For us it therefore means the new tenant will need to sign their tenancy agreement and pay rent and deposit earlier than necessary. I don’t get why this is necessary as a change.
Thus following today’s date, we can only take five weeks. Will it make a huge difference to us in terms of good tenants? No. Will it make a difference if we get shoddy tenants? Yes. Will it make much more of a difference to landlords who maybe deal with the sharper end of the tenant stick and have less professional tenants than ours? Absolutely. An unnecessary and poorly thought out change, imo.
It’s interesting to read that there has been a phenomenal growth of no deposit schemes where the tenant does not pay a deposit but a kind of insurance policy instead. If at the end of the tenancy the landlord ends has a claim against the deposit, the insurance will pay the money to the landlord and presumably the payout could exceed in the limit of the 5 week rent imposed by the legislation. Let’s watch how this one pans out.
Likewise with the holding fee. We charge £150, which actually then comes off the deposit, so it’s not really a ‘fee’ at all unless the tenant pulls out, because it’s non-refundable. If the tenants pulls out then there are re-advertisment costs and also likely lost rent as time has been wasted. It’s a fair business trade off for flaky tenants. Reducing it to one week is all very well and good in London where rents are over £1000 a month but what about in the provinces at £350-£400pcm? It should be capped to one weeks rent where the rent is over £800pcm. Again, a very Londoncentric change.
Properly assessing damage and cleanliness becomes ever more important to ensure fairness to both parties at the end of the tenancy. This means the inventory becomes even more critical, but as the costs for this cannot now be passed on to the tenant, they must be born by the agent, which means ultimately means borne by the landlord.
As stated by the TDS (Tenancy Deposit Scheme) “Even well looked after contents will deteriorate with time and use. Landlords need to allow for fair wear and tear during a tenancy. Tenants will however be liable for breakages, missing items, or damage to the property, which are in excess of fair wear and tear, as well as cleaning. These issues will arise where a property suffers because of the tenant’s carelessness, negligence, misuse or deliberate damage. Deciding which of these scenarios applies will depend on having good quality information to show a property’s contents, condition and cleanliness at the start and end of the tenancy.”
Landlords – you’re gonna have to bear the cost of this but it will protect you in the end. We’ve been stung to the tune of hundreds of pounds by a decision from the My Deposits scheme when they backed a terrible set of fibbing boy tenants, because our paperwork wasn’t detailed enough and they weren’t then geared up to take phone pics (pre-2011). It was a very painful lesson.
All in all I can totally understand why action has been needed. For too long landlords have passed on their responsibilities to rental agencies who have run riot, charging ridiculous fees for often very poor service. I’ve lost count, seriously, of the number of tenants who express relief at dealing with us direct because of the poor services from previous agency dealings.
But as usual with Government, it’s a sledge hammer to crack a nut. Instead of looking country wide and assessing the proposed changes, this Conservative government have decided to cement the role of landlord as baddy and listen to the vociferous squealings of bodies like Generation Rent. Tax attacks on landlords are already making many either downsize or leave the industry, which might mean more property on the market to ease the shortage of homes to buy, but also means less rental homes for tenants, in an ever growing transient market of renters. I’ve always loved being a landlord and we are really good ones, with really happy tenants, but I’m sick of the assault to, and can’t actually afford to be one now these tax changes are coming in. Lots of other small landlords feel the same way and are being forced out of the market. More on the blog next week as to why I think the Govt are doing this and what I think the impact might be.
The Conservatives have always been seen as the party for landlords but only last week in an article by Sam Baker in the Telegraph, it was reported that “almost 70pc of National Landlords Association (NLA) members voted Conservative in the 2017 general election. But only 16pc would vote Tory if another election were called today, according to a new poll”. That’s a helluva swing. The poll suggested that the Brexit Party would pick up 22pc of the vote and the Liberal Democrats 15pc. Nearly a third (31pc) of landlords said they were unsure or would not disclose who they would pick. Probably not Labour, if Jeremy’s rent control idea picks up speed.
Interesting times ahead….