Autumn Statement – Tenant Fees in England

The government has decided to ban tenant fees in a bid to make renting more affordable. The question is will it have the desired effect or is it just another headline grabbing publicity stunt?

Housing Minister Gavin Barwell MP said in a tweet just a few weeks ago that a ban was a “Bad idea – landlords would pass costs on to tenants via rent. We’re looking at other ways to cut upfront costs & raise standards.”

Communities and Local Government Minister, Lord Bourne, also expressed reservations about such a policy warning that “we must be mindful of the potential impact on rents from banning fees paid by tenants.”

http://www.telegraph.co.uk/business/2016/11/23/autumn-statement-2016-summary-highlights-everything-need-know1/

Considerations

Clearly there are costs associated with setting up a tenancy – these allow agents to carry out critical checks on tenants – if tenant fees are banned, these costs will be passed onto landlords who will in turn pass on to tenants in the form of increased rents. The banning of fees will end up hurting the most, the very people the government intends on helping the most.

Surely it would be more sensible if the Government were to look at alternative measures such as increasing the transparency of tenant fees so that agents declare what fees cover. Alternatively, fees could be capped as a percentage of rent which would be fairer than charging fixed fees for all property types.

 

Wide reaching implications

As well as increased rents, consider the wider implications of banning fees:-

  • Increased monthly rents will cost the tenant far more than paying a one-off fee and the longer the tenant stays, the greater the cost.
  • If tenants are paying ongoing higher rents, their ability to save is diminished which means it will take them longer to save for a deposit to purchase a property.
  • Additional costs to the landlord will further decrease profits (which are already being diminished by the cut in maintenance relief and increased tax implications) consequently landlords may question whether to use an agent at all.
  • The rental sector is highly legislated for and qualified agents facilitate the adherence to these regulations because their accreditation is dependent upon following strict guidelines. If landlords are not using agents, their properties may not be fully compliant – simply because a framework for reliable information for landlords is not in place. Non-compliant properties pose a host of potential dangers for tenants. Critical checks such as gas safety, electrical safety, CO and smoke alarms, legionella risk assessments, property safety all need to be undertaken to ensure the tenant is not at risk or risk is minimalized.