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Tenant fees ban - the unintended consequences

Written by: MaryAnne Bowring 05/06/2019
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Introduction to the Tenant Fees Act

The Tenant Fees Act came into effect in England on Saturday, raising important concerns within the lettings industry. While the government and industry professionals both aim to make renting fairer for tenants, there is uncertainty about the law's real-world impact. Glynis Frew, CEO of major letting agency Hunters, warns that despite good intentions, the Act might result in unintended consequences.

Addressing the Issue of Rogue Agents

The Tenant Fees Act targets the rogue agents and landlords who have been charging what Frew describes as “mind-boggling” fees. While these practices are certainly a problem, they represent a small fraction of the industry. Instead of introducing fee caps, the legislation has opted to eliminate these fees entirely.

Unintended Consequences: Rent Increases and Industry Impact

The removal of tenant fees has the potential to lead to unintended negative effects. Agents predict that landlords will raise rents, and more landlords may exit the market. This could result in fewer letting agents, reducing consumer choice and harming local high streets, where agents are a key part of the commercial ecosystem.

Shifting Business Models for Letting Agents

In response to the Tenant Fees Act, letting agents will likely adapt by adjusting their management fees and passing costs like deposit registration to landlords. To recover lost income, agents may promote additional services, such as insurance products, where they can earn commissions.

Enforcement and Financial Penalties for Non-Compliance

Local authorities are responsible for enforcing the Act and can impose significant fines on landlords and agents who violate it. Fines can range from £5,000 for levying a prohibited fee to up to £30,000 for repeated offenses. Agents and landlords who have been penalized for previous breaches within the last five years face stricter scrutiny.

New Challenges for Landlords and Agents

Being a landlord has become more precarious, as the Act reduces tenant deposit limits and restricts payment methods, such as credit card payments. While alternatives like Deposit Alternative products are emerging, these are optional. Agents must now work harder to provide added value, ensuring compliance with the Act, and offering effective services like tenant referencing, contracts, and deposit management systems to their landlords.



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