Thursday, 6 June 2019

Five major changes introduced by the Tenant Fees Act

Originally centred around banning administration fees to tenants, it’s actually the ‘other stuff’ that has been bolted on to the Tenant Fees Act that I believe will have the biggest consequences for the lettings industry in the long-term. Here’s five major changes and how this may impact the market:

Holding deposits
You can now only take a one-week holding deposit, which must be returned to the tenant within 15 days if you haven’t entered into a tenancy agreement by then. With many tenants having to give one months’ notice to their previous landlord, clearly the timescales don’t quite work here. Cue having to get applicants to waive this right, which is allowed under the guidance. And a word of caution to those landlords who instruct multiple agents (which I don’t advise)…it’s now illegal to take more than one holding deposit, so if each agent happens to accept a tenant and take a holding deposit, it’ll be you carrying the can for the £5,000 fine.

Security deposits
Security deposits will be capped at five-week’s rent (for rents up to £50,000pa). Whereas tenants with credit issues, who are self-employed (with income that’s hard to prove) or with pets used to be welcomed simply by asking for an increased security deposit, now this is not an option. Instead many will be rejected outright and will thus find renting a home even more difficult than it already is. They may alternatively be asked to pay an enhanced rent (which is allowable under the guidance of the Act).

Third-party payments
You can no longer enforce the use of third-party companies upon tenants. Traditionally this would have been in the form of clauses in the tenancy agreement to protect against certain things e.g. end of tenancy carpet cleaning for pet owners or annual chimney sweeping for properties with open fires if the tenants wanted to use them. Without these it is likely the usage of the property will be restricted and pet owners will again find that landlords are less likely to accept them.

Tenancy amendments
The charge applicable for any alterations to the tenancy agreement, for example leaving early, adding a pet or changing a named tenant, will be restricted to £50 or the reasonable cost (which needs to be proven to avoid a potential fine). Renting is therefore set to become less flexible, as it is far simpler to say ‘no’ to a request rather than to take on a load of administrative work (which often isn’t in the landlord’s best interests) for such a small sum.

Rent arrears
Landlords want their rent to be paid on time, so many used to insert late fees or a reasonable interest rate into the tenancy agreement as a deterrent against late payment. Now, however, all that can be charged is interest of 3% above the base rate, but only after the rent is 14 days late. This effectively gives tenants a two-week line of free credit, followed by perhaps the cheapest personal loan on the planet!

Unfortunately, I believe these changes will lead landlords to be pickier than ever as to who is allowed in their properties, as well as being less flexible (and perhaps less helpful) than they were before the Act came into force.

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