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Market Commentary: Tenant Fee Bill Update

Posted: 16/01/2019

Adam Powell BSc (Hons) MARLA Residential Letting Manager provides some market commentary on the Tenant Fees Bill passage in to law and its impact on Residential Landlords.

The private rented sector has seen a raft of legislation cross it’s bows in recent years and landlords have had to grapple the sometimes confusing and poorly communicated legislation. This has been compounded by coinciding with tax changes on property investment that has made many landlord’s reassess their portfolios to ensure they are correctly geared to maximise returns.

Despite this, further changes are set to place with the recent Royal Assent of the ‘Homes (Fitness for Human Habitation) Act 2018’, and other legislation around the corner including – a review on electrical safety, revision of smoke detector regulations, further restrictions on Energy Performance bandings, and the impending tenant fee ban.

In respect of the Tenant Fees Bill. The bill is currently in its final stages of review and yesterday, whilst the world was focussing on the Brexit vote in the Commons, the Tenant Fees Bill undertook it’s third and final reading with the House of Lords. It has been met with little objection in its passage through Parliament and a date of 1st June 2019 has now been tabled for the act to become law.

In summary the act would ban charges of any fees to tenants by either landlords or their agents in entirety, it also has inclusions for capping property bonds at five weeks rent and restricting holding fees by applicants to one week’s rent. The theory behind the bill is to limit moving costs/fees for tenants allowing easier transfer between properties and making the private rented sector more financially accessible, however, there are likely to be unintended consequences to the market.

Thorough reference checks, drafting of legal documentation, bond protection and compliance all come at a cost to the landlord and if investment in the private rented sector is to continue, then it needs to be financially viable for those that invest. It is likely that some less well prepared investors may exit the market curtailing supply whilst others will raise rents in a bid to ensure their costs can be covered – both will have the same impact for prospective tenants, less choice in the market and higher average rents.

The scale of the impact to both landlords and tenants alike remains to be seen but landlords need to prepare for the fact that there will be an impact, possibly more significant than most anticipate – and as such must plan accordingly.

Anyone seeking specific advice over their portfolio or trends in the current market is welcome to contact me.