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1st June 2019 – the end of tenant fees

"On 1st June there will, no doubt, be a surge in agents’ fees to landlords as the Tenant Fees Ban comes into effect, so, says Frances Burkinshaw, how will you survive?"

Frances Burkinshaw

Handing over keys imageMany agents will lose a large percentage of their income on that day and the temptation will be to put those losses into fees for the landlord.

The result could be that landlords leave in their droves deciding to manage their properties themselves. Herein lie many dangers.

Letting a property appears to be simple – you have a property, you advertise for a tenant, they move in and pay rent and a deposit. You maintain the property and serve notice when you want the tenant to leave. They leave, you return the deposit and the circle is closed.

It is the hidden dangers that are so important and it is in these areas where a professional agent will help and guide the landlord ensuring that legislation is adhered to and pitfalls avoided.

Simple errors… serious problems

A recent case shows how a simple error can lead to serious problems for a landlord. In Caridon Property Ltd v Monty Shooltz the judge ruled that possession using Section 21 would not be granted. This was due to the fact that the landlord had not given the tenant a copy of the gas safety record before the tenant moved in. The gas safety regulations have always stated that the record must be handed to the tenant prior to moving in but it was the Deregulation Act 2015 that linked the gas regulations to Section 21.

House visits mustn’t be cancelled to save costs and increase profit. They are essential for numerous reasons.

The record was given to the tenant after moving in but this was not good enough for the court. Effectively therefore this tenant has now become a fully Assured tenant and the landlord will only be able to gain possession by citing one of the Grounds for Possession which, in effect, will only work if the tenant is in breach.

Frances Burkinshaw image

Frances Burkinshaw

The same could apply in a future case if it can be shown that the EPC has not been given to a tenant prior to moving in – and so on…

Government is introducing more and more legislation which, in time, will mean that residential letting agents will have to be properly qualified in order to be able to trade. About time too many would say. Cowboy agents hopefully will then disappear and landlords will be able to instruct an agent in the knowledge that their property will be let well and securely by qualified members of staff.

Sensible fees

With the demise of the cowboy agents I very much hope that fees can return to sensible levels as they once were. If the commission rate is set at a reasonable level there should be little need to charge landlords so many extras. Let’s stop this game of offering full management for 5 per cent. It can’t be done unless lots of extras are piled on top. Historically the tenancy agreement and the inventory were always the main charges – previously shared between landlord and tenant. Clearly the landlord will now have to bear this cost.

The increase can, however, be managed due to modern technology. The tenancy agreement is a standard document altered and added to by means of special clauses to suit the needs of the tenancy. The cost to the landlord covers this but also helps pay for the agent’s legal fees for advice and ensuring that they are always kept well up to date with changes in the law. These services are now available at a greatly reduced price for agents so this should be reflected in their charges. Similarly the inventory preparation and check-in and out will be charged to the landlord now but with modern technology and photography the job can be done in a much shorter time frame thereby reducing costs.

This can be replicated throughout the work that the agent has to complete for the landlord. Safety checks must be carried out, documented and passed on to the tenant. These will include, before long, five yearly electrical safety tests. By working with suppliers in this field and by negotiating bulk discounts agents will be able to reduce costs for the landlord.

House visits must not be cancelled to save money and increase profit. They are absolutely essential for numerous reasons – not least to ensure that the property has not suddenly become an HMO without the agent’s knowledge. These visits, however, if well managed can be carried out in a timely fashion with several being done in a day; most tenants do not mind the agent visiting if they are out at work as long, of course, as an appointment is made beforehand. I have always believed that the cost of house visits should be included in the commission rate of full management. This can be an excellent USP.

Be prepared!

By June 1st agents will have had to re-write their terms and conditions both for landlords and tenants. They should ensure that their clients are quite clear what they will be charged for and how much; transparency will be the key. Income will be reduced but this can be managed if landlords remain loyal to the professional, fair agent. If landlords take their business away and tenant fees cannot be charged many agents will not survive.

To contact Frances, call 01892 783961, 07887 714341 or email: frances@ivychimneys.co.uk

April 18, 2019

2 comments

  1. With the extraordinary effect, the fees ban is having on the industry I am surprised that ARLA and other major institutions/agents have not got together to seek a judicial review of the regulations. I’ve seen it estimated that around 3,000 jobs will be lost for next to no benefit to tenants, all this stuff about transparency is nothing more than a patronising red herring. When Honda announces 3,000 jobs are going the government is falling over itself to mitigate the fallout, why no such outcry from our industry?

  2. With the extraordinary effect the fees ban is having on the industry, I am surprised that ARLA and other major institutions/agents have not got together to seek a judicial review of the regulations. I’ve seen it estimated that around 3,000 jobs will be lost for next to no benefit to tenants. All this stuff about transparency is nothing more than a patronising red herring. When Honda announces 3,000 jobs are going the government is falling over itself to mitigate the fallout – why no such outcry from our industry?

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