Not all landlords are aware of impact of tenant fees ban in England

The tenant fees ban which came into force in England a month ago could prove to be a headache for landlords for the next two to three years while a new analysis suggests a large number of tenant applications have been rejected in the last four weeks.

According to agents Chestertons, landlords are still unaware that the ban looks back as well as forwards. It says that as the legislation is enforceable on all Assured Shorthold tenancy agreements, landlords don’t just need to adjust, they need to get to grips with the complexities involved with unravelling existing tenancies.

It believes that a large number of landlords are likely to still be in the dark that sections referring to extra costs on agreements drawn up before 01 June 2019 may not be binding when it comes to a tenant moving out of a property, or once the tenancy renews.

Donna Ingram-Fletcher, head of tenancy services at Chestertons, said:

‘Many landlords are unaware that if a tenant moves out after 31 May 2020 costs cannot be charged to the tenant, even if these were written in to a tenancy agreement. Landlords could be in for a shock next June when services, such as an end of tenancy professional clean, cannot be charged to the tenant despite a clause in the contract. So the wording of tenancy agreements is more important than ever to ensure peace of mind and prevent landlords from being caught out.’

She explained that the Government’s ‘one size fits all’ policy also means landlords and tenants of certain building types are adversely affected by the changes. For example, the dominant building type in prime central London areas, the mansion block, is proving to be tricky. These blocks rely on whole building, centralised facilities, such as heating systems, which historically were charged to tenants based on average use.

Tenants can now only be charged for specific usage of such utilities and in many cases such additional tenancy costs will now be added onto the rent, and agreements updated to reflect this at the point of renewal. Should the average costs to the landlord at the end of the year exceed the amount recouped via the rent, the landlord will have to accept this as a loss.”

Meanwhile an analysis of rental figures from HomeLet by online letting agent MakeUrMove has found that landlords and letting agents have seen 67% of tenant applications rejected since the ban came into force.

These unsuitable applications could include tenants applying for a property they cannot afford, or not disclosing the possession of a CCJ or previous history of bankruptcy. As a result, landlords now face the prospect of two unsuccessful applications on average for every successful one, resulting in an increase in the length of time it takes to fill a property, according to the firm.

It says that this could lead to landlords having to increase rents in order to cover the cost of properties sitting empty for long. ‘What was intended to offer a fairer solution to tenants is seemingly leading to an increase in individuals trying their luck when it comes to applying for a rental property. The investment and risk once associated with applying for rental property have been completely removed, meaning many landlords are now left with rising costs and the prospect of empty properties for longer,’ said MakeUrMove managing director, Alexandra Morris.

Morris said:

‘The housing market in general needs an overhaul, but with the Tenant Fees Act now in place, it’s clear the referencing process is also an area which needs to be revamped. We need to learn from the processes used in online banking and create a tech solution which allows landlords and letting agents to conduct an instant financial check, which looks at a prospective tenant’s income as well as their past rental payments.’

She also pointed out that the Tenant Fees Act is just one piece of legislation the Government has recently introduced intended to make the private rental sector fairer for all. The banning of Section 21 notices could negatively impact the lives of many landlords, leading many to sell up and leave the market.

Morris said:

‘While we support the government in making the private rental sector fairer for all, many of the new laws favour tenants over landlords. The Government risks landlords leaving the market altogether as a result of the increased costs. This would then lead to a lack of supply, and the knock-on effect of rising rents as a result of the increase in demand for rental properties.’

Kindly shared by Property Wire