The tenant fee ban will soon affect landlords across the UK. This will come at a time when recent tax changes, the stamp duty surcharge and phasing out of mortgage tax relief are already taking a big toll. In December 2017, 43% of landlords were completely unaware or knew very little about the Tenants Fee Ban, which is due to come into force next year. Landlords can’t afford to ignore the ban and not be prepared for what lies ahead.

What are Tenant Fees?

When landlords use a traditional letting agent to let out their property, the agent will charge ‘application fees’ from the tenants to cover the costs of credit checks, referencing, drawing up the tenancy agreement and registering the deposit. Charges can also include a mandatory inventory fee, renewal fees, and the agent’s ‘admin fee’. A tenant pays on average £233 in fees, but 1 in 7 tenants will pay over £700, and it has been reported that in certain instances tenants are paying over £2000 in ‘fees’ to rent a property. With many people now moving home every year, this can put a huge strain on families and individuals. Research by the Citizens’ Advice Bureau (CAB) found that 42% of renters had to borrow money just to pay their tenant fees.

What is the Tenants Fee Ban?

The Tenants Fee Ban will see almost all fees previously charged to tenants by letting agents and landlords banned. Landlords and letting agents will still be allowed to charge rent, as well as:

• Security deposits (capped at 5 weeks’ rent)

• Holding deposits (capped at 1 week’s rent)

• Tenant default charges

Landlords and letting agents will face an initial fine of £5000 if they don’t comply.

Impact on landlords

Tenant fees account for approximately 19% of a letting’s agents income, with some agencies reporting as much as 30% of their annual income from tenant fees alone. Scott Littlefair, Managing Director of Littlefairs Property Company says, “from my experience some Letting Agent’s will not have a sustainable business from wiping this income off their P & L. Agents will look to recover this by increasing the fees they charge to landlords. We have seen this take place already ahead of the ban by some of our main competitors in the York region.”

There is obviously much speculation about how the Letting Industry will react but without a shadow of a doubt, no-one can run an unprofitable business and by banning letting fees to tenants, Let-only businesses, face just that scenario. Adam Walker, who is a leading property industry figure recently commentated in the Negoatiator magazine, “Interestingly, a number of large firms are also reconsidering whether they will be prepared to offer any landlords a let-only service in future on the basis that without the tenant fee, the service will no longer be profitable. This will be a massive change for the letting industry to get to grips with.”

Best foot forward for Landlords

We started Littlefairs Property Company to provide a fair, clear letting solution for both landlords and tenants. For savvy Landlords, this is the time to start looking around for better alternatives to your current letting agent. Extracting your property from its contractual obligations with a traditional letting agent can take up to 6 months so it is important that you get ahead of the curve. Our pricing structure is set up with these inevitable changes in mind so you know where you stand for the foreseeable future.

For more information or advice on the tenant fee ban or our clear cost structure please contact one of our experienced team on 01904 393989.