It was announced on 15 January 2019 that the awaited Tenant Fees Bill will come into force in England on 1 June 2019.
The Bill weighs heavily in favour of tenants; as from 1 June, landlords and letting agents can no longer require money from a tenant for anything other than a holding deposit, rent, security deposit and charges for defaulting on the rental contract. Also, the level of the deposits taken is capped.
Some common fees currently payable by tenants, such as charging for a guarantor form, credit checks, inventories, referencing, professional cleaning and administration charges, will now have to be borne by either landlords or letting agents.
Obviously, on the face of it, this is great news for tenants but not so great for landlords, particularly those who have a sizeable property portfolio with a high turnover of tenants.
Looking deeper into the consequences of this Bill, could it actually be ‘too good to be true’ for tenants? Although there will be less outlay for tenants at the outset, will landlords seek to recover their additional expenditure by increasing the rent?
Largely, this will remain to be seen after the Act comes into force, and will likely depend on how much profit landlords will lose over a period of time. It may be that the majority of landlords won’t see much of a decrease in their profits at all, especially if they have tenants that remain in the property for a long period of time. The Bill contains a ban on setting rent at a higher level for the first portion of the tenancy and then dropping it afterwards. However, a higher rent than previously charged for the property, that remains consistent throughout the tenancy, is fine.
Obtaining detailed and relevant information from prospective tenants, prior to the formal credit/referencing checks being done, will give insight into the likelihood of the results being satisfactory. This may prejudice some tenants though, as landlords may choose not to proceed with the checks based on the initial information provided, and the tenants could lose out on renting the property.
Any landlords considering foregoing the referencing checks altogether should be aware that most landlord insurance policies require satisfactory credit checks and be obtained prior to the tenancy commencing. The last thing a landlord wants, if they find themselves in a position where they need to make a claim on the policy, is that cover is declined due to the necessary checks not being obtained.
At this stage, we can only surmise how the change in legislation will affect the rental market, but we do know that June will be here before we know it!
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