In the Autumn Statement the government announced its intention to ban the tenant fees charged by Estate / Letting Agents. What will this mean for tenants, Letting Agents and landlords ?
In 2012 fees charged to tenants by Letting / Estate Agents were banned in Scotland so the announcement for the same to happen in England has been expected for the past couple of years and groups such as Shelter and Generation Rent have been lobbying hard for the ban. The only surprise was the announcement without warning in the Autumn Statement although the time frame hasn’t been announced yet.
For tenants this will mean not having to find any upfront costs when applying for a property although I would expect more agents to request a ‘Holding Fee’ . This is deducted from the 1st months rent, but shows commitment from the applicants. Should they decide to withdraw without reason then reasonable costs could be deducted before refunding the holding fee. A holding fee could typically be £300 or more depending on the property.
For Letting / Estate Agents there will be a reduction in their income which might result in the need to reduce staff numbers or reconsider increasing the number of staff they have until they have adjusted their costs accordingly. For some Estate Agents who rely heavily on charging tenants for costs such as renewing their tenancy agreements every 6 months although there is no legal requirement to do so and charging the tenants fees of £150+ for doing so, the loss of this income stream might result in them closing the lettings side of their business and concentrating on the sales side only. For many Estate Agents lettings was the side of their business that is secondary to their main business and income stream of sales and the amount of administration and legislation involved was become a headache for them.
Dedicated lettings Agents who are properly resourced, have all their procedures in place and focus on lettings as their only business should be able to adjust and streamline to the changing income stream.
The argument by Shelter and Generation Rent for a ban on administration fees to tenants was that Landlords should pay all the costs and none of it should be shared. Some would argue that the inventory at the start of the tenancy was to protect the tenant and their deposit at the end of the tenancy. Also the amount of chasing for tenant ID, proof of address, bank statements, employment contracts, accountants reports etc to allow them to pass referencing, right to rent checks now required by all adult tenants, follow up viewings, requests to move in at unsocial hours is a cost that the landlords will have to contribute towards as part of the fee charged to them by the agents.
Show me a landlord willing to pay more fees without expecting to recoup them in other ways especially if they will be losing out on the mortgage interest they can claim back on their income tax bill from next April.
What is this likely to mean for tenants ? Unfortunately we are likely to see increases in rents as landlords look to recover the extra costs. These might be relatively small and we are not talking large increases but if the increase is calculated over 2-3 years it could be the tenants who are worse off in the end. If you are a short term tenant for 6 months then you are likely to have saved on your overall costs. It will also make it easier for tenants to move property if they wish as they will not need to find the upfront admin fees although as mentioned previously I would expect a ‘Holding Fee’ to be requested.
Once the date is announced by the government there will be changes. Rents will increase. In fact since 2012 when fees were banned in Scotland rents have risen 15% whilst in England they have risen between 2% and 11% (London). Some Estate Agents will stop doing lettings. Maybe some Letting Agents will start doing sales to add to their income ? Some agents might reduce the amount of effort they put into viewings if they are not receiving the same income and possibly just take the first applicant instead of choosing the most suitable from a choice of applicants.
This all leads to the question of what should a landlord new or potential be doing ? They need to see how their current agent is responding to the potential changes. Are staff numbers being reduced ? Does the service level begin to fall off as they lose interest in the lettings side of the business ?
There have been a number of legislation changes over the last 18 months such as the requirement for smoke and CO2 alarms ( solid fuel only), Deregulation Act 2015 and the right to issue a Section 21 notice, the new Section 21 & Section 8 notices and the required Right to Rent checks among others. You need to be confident that your agent is up to date on the current legislation and keeping your properties and all their procedures compliant. Look for an agent who you are confident in, has a good local reputation, is a member of the relevant bodies with Client Money Protection and with the changes in administration fees chargeable to tenants will continue to give you the service level they did previously.
Another new residential development proposed in Dunstable on the disused former Trico site part of the old AC Delco site
Catalyst Housing limited are proposing a development of 61 residential units consisting of 38 houses and 23 flats on the corner of Brewers Hill Road and High Street North opposite The Incuba Business Centre. The proposal is for a mix of 23 two bedroom flats within a four storey block, 10 two bedroom 2 storey houses and 23 three bedroom 3 storey houses.
Commonly known as The Trico site where motor vehicle parts were previously manufactured and before that it was part of the vast AC Delco site. Trico stopped operating at the site in 2003 and the buildings were demolished in 2005. The main AC Delco site was redeveloped by Bloor Homes during the past 7 years.
The site has been marketed by four different agents over the years for use as a care home, employment or residential use with no interest in the options for a care home or employment uses.
There will be 18 (2 bed) affordable rent units in the apartment block and 5 shared ownership (2bed) units within the apartment block It is proposed that a further 8 shared ownership (3 bed) houses will also be included.
This is in addition to a number of other proposed residential developments in Dunstable that I have mentioned previously which includes the large vacant site next to the BP garage on Luton Road and a large unseen site behind the new Priory Heights building on Church Street.
This months speakers will explain:
How to eliminate financial risk in property – 5 steps to property success – Jonathan Stein
After building a cash flowing Buy to Let portfolio Jonathan jumped out of the corporate rat race to concentrate on property full time. His primary focus is “adding value” to everything he does.
ALSO… Transfer your Pension Fund into Property – Mike Holt
Pension changes in the 2014 budget now mean that your Pension has become one of your most valuable assets by way of a Self Invested Personal Pension (SIPP) to allow you to invest in a broad range of Property classes.
Mike Holt is going to introduce you to the simple concept of using that money to buy land and property with the view to growing the value of your pension substantially.
Find out more and register for your FREE entry by going to www.lutonpin.co.uk and entering the details below:
To use this code for your FREE entry it must be your first time attending a PIN meeting. You can also pass it on to other people who might be interested.
New and existing Landlords are you sure you are compliant with all the regulations and keeping up to date with recent changes?
Continual updates to property letting regulations make it hard for the average landlord and tenant to remain legal. Legislation for landlords to provide safe and compliant homes is constantly up-dating, but many landlords feel it is becoming more onerous and harder to keep up with. If you are unsure about any of the updated legislation mentioned in this article email email@example.com
The following is a list of some changes introduced in the last 12 months that all landlords should be aware of and ensure they are compliant with.
With so many new laws recently introduced it can be increasingly difficult for landlords to self-manage their portfolios and ensure that are up to date with current legislation.
10% of landlords have no formal tenancy agreement in place at all with their tenants and Landlords may also be unwittingly asking tenants to sign documents that are not legally compliant as they are using old outdated tenancy agreements.
The consequences of not being compliant places the landlord at greater risk of tenant problems, significant fines and potentially putting a tenant’s life at risk through non-compliant gas installations.
The vast majority of the U.K.’s circa 2 million landlords are often people who do not even consider themselves a landlord, as they have a day job or career and just invest in property as a pension hedge or to generate additional income. They may be too busy in their work-a-day world to keep up with their legal obligations.
The majority of landlords let out just one property, so you do wonder how on earth they are supposed to keep up with these changes. Many don’t use a letting agent – and of those who do, only 60 per cent use an agent who keeps up to date with latest changes via bodies such as the National Approved Letting Scheme or Association of Residential Letting Agents. Belvoir Dunstable are a member of the Property Ombudsman Scheme, NALS and SAFEagent.
Why would you use a Letting Agent ?
Legislation and Training
Regulated letting agents must keep up to date with the latest legislation to ensure their teams have a full knowledge and understanding of all legal and compliance surrounding the letting of properties. Belvoir have a legal and Compliance team in their Head Office in Grantham to ensure we are kept fully compliant and up to date.
Membership of a redress scheme
Regulated letting agents must be members of a redress scheme to ensure consumers are protected. Belvoir Dunstable are members of The Property Ombudsman (TPO) a UK government-approved organisation which providing independent conflict resolution and raising standards of service in the residential property industry.
Your money is protected
Belvoir Dunstable have client money protection ensuring that rent deposits and client funds are protected. Belvoir Dunstable are also members of the SafeAgent client money protection scheme. This ensures that client money is held in a designated client account and accounts are independently inspected annually (and an accountant’s report is submitted to NALS each year).
Professional Indemnity Insurance
Belvoir Dunstable have professional indemnity insurance (with the appropriate cover). Professional indemnity insurance covers businesses in case inadequate advice or services are provided to a client; professional indemnity insurance will cover legal costs and expenses in defending a claim, as we as compensating businesses for any monies required to rectifying a mistake.
If you are unsure about any of the updated legislation mentioned in this article email firstname.lastname@example.org
Demand from Amazon workers for Studio and 1 bedroom apartments changing the local Dunstable rental market.
The opening of the new Amazon building in Dunstable a couple of weeks ago has resulted in a stream of tenants looking for local accommodation and has resulted in a very busy period of viewings and of course discussions with the tenants unused to the UK rental market to explain the whole rental process.
Most of the tenants are single or young couples from Europe looking for studios or 1 bedroom apartments and unaware that they will be required to pay for their utilities and council tax as well as the rent resulting in them having to reassess their budgets.
The amount of single tenants now moving to the area for work would seem to have created a new possibility for HMO’s (House of Multiple Occupancy) and also the opportunity for owners to rent out a spare room to lodgers. Lodgers were common when I was growing up and we had a Bus Driver who rented a room in our house for many years. This was one way of making ends meet at that time.
HMO’s are common in Luton where there is a demand for this type of shared house, but previously there wasn’t a requirement in Dunstable. This is now changing and I know of a few landlords who now have licensed HMO’s in Dunstable and are adding to them. We are also hearing from investors who haven’t considered Dunstable for its HMO potential befor, but they are now investigating this market. This isn’t every landlord’s ideal investment with greater upfront costs to make them compliant, the need for furniture, the extra management of the property and often the relationships of the tenants to manage, but the returns can be far greater than having a single let.
The rental values of studio apartments in Dunstable have shot up by 25% from 2012-2016 where during the same period studio apartments in Leighton Buzzard had only increased by 6%. These studio apartments would have been difficult to find tenants for 3 years ago, but with the demand we are now seeing we are recommending our landlords smarten them up to attract the right tenants.
2 bedroom apartments are still popular having always been the most sought after but studio’s and 1 bedroom apartments have seen a much greater demand recently. Larger family 3 & 4 bedroom houses are seeing less demand. The prices being asked for by some landlords & agents is more than the local market should be expected to pay and the result is many 3 & 4 bedroom properties left empty for months and the loss of a sizable rental income.
It is easy for an agent to value a 3 bedroom house at £1300 or even £1400pcm to gain an instruction if the landlord is going to base their choice on the highest valuation, but if that agent then fails to achieve that price and the property is empty for a few months the loss of income is much greater then asking a reasonable rental price and having your choice of tenant.
Daniel Bourke is the owner of Belvoir Lettings Dunstable and in his previous career in Architecture he was an Associate in a leading London Architectural practice