COMMENT: Banning ‘rent in advance’ sounds noble, but risks chaos for agents
Labour's recent amendments are designed to protect financially vulnerable people from 'exploitation' but how, asks The Neg's Nigel Lewis, will agents and landlords manage tenancy risk in the future?
The property industry and the legal experts who underpin it have been looking at the most recent amendments to the Renters’ Rights Bill, and to say jaws have been hitting the ground is to put it mildly.
Labour and in particularly Housing Minister Matthew Pennycook may have had fairness and justice in mind when drafting these amendments, but many commentators are extremely concerned that Amendments 13 and 14 – which effectively ban agents asking for rent ‘upfront’ or ‘in advance’ – have not been thought through in Whitehall.
These also mean, some people believe, that agents will be prevented from taking payment of rent until a tenant has moved in, but that remains to be seen.
This all comes on top of other measures and amendments within the Bill which will make tenancy changeovers harder including a ban on rental ‘bidding wars’ plus the banning of fixed-term tenancies.
Noble aims
These may all sound noble (there have been strong debates about whether they are solutions to problems that don’t exist) but it begs the question – how in the future will landlords mitigate the risk of tenants who fail referencing, have no renting history in the UK or have CCJs against their name?
How in the future will landlords mitigate the risk of tenants who fail referencing?”
Millions of people fall into these categories, including a friend of mine who recently sold his flat to finance his business, deciding to move into a rented home.
Because he hadn’t rented for decades, he failed referencing and was asked to provide six month’s rent in advance, which meant digging deep to pay the £8,000.
Out of options?
The question is, once the Bill becomes law in March, what would his landlord/agent have done?
Rent guarantee insurance may struggle to help, as insurance firms ask that tenants pass referencing before policies can be issued, and ‘rent guarantor’ services can be choosy about who they will take on, for similar reasons.
So what will happen, I am confident in predicting, is that the ‘rent in advance’ system will go underground and people like my friend will be asked to stuff cash into brown envelopes while rental payments will be edited to make it seem like all is well.
Rule breaking
This means both landlords and agents will be dragged into rule breaking just to get tenancies completed… or they will have to take on risky tenants.
I can’t see many landlords doing this, however charitable they may be. Evictions are currently taking between six and 18 months to complete during which rent is not being paid – 70% of all Section 21 evictions are prompted by rent arrears.
Evictions are currently taking between six and 18 months to complete during which rent is not being paid.”
But the Government does not see it this way, viewing ‘rent in advance’ through the lens of ‘exploitative landlords’, saying recently that “this unfair practice can encourage prospective tenants to stretch their finances to the limit, preventing them from moving within, or accessing the sector altogether”.
Given ministers are not keen to back down – even though most trade organisations within the property industry are against the ban – the ordure is going to hit the fan in March, don’t you think?
It simply shows such socialist ideals from this government, why on earth would they not to listen to the industry who have clearly set out the issues for tenants who don’t fit the normal profile for referencing. Rent in advance puts those tenants in a much stronger position and now it will be taken away – how exactly is that helping tenants?
Matthew Pennycock does not look like a landlord to me, he looks to me like a bitter little man who still holds a grudge for having a chunk of his deposit taken from his student house he left in a shambles.
I can see a great opportunity for a third party firm to take rent in advance in escrow and release it monthly to the landlord / agent, therefore getting around this ridiculous new amendment.
A professional rent guarantor service can more or less wipe out the worry for landlords and agents. Fully insured and very low decline rate for applicants, it’s worth looking into.
As in all cases they never think of the wider ramifications.
This is only 1 issue in the new RRB
What landlord will want to let on a no fixed term basis? There needs to be some end date in place even if they adapt it in some way. So many of our LLs are not renewing and looking for VP to sell up.
That’s will take more properties out of an already weak database of properties to let. Which in turn will increase rents to any LLs who do stay “in the game” #shortsighted
It’s doing to be 💩 show for the hardest hit tenants. We saw this with the tenant fee ban. The government is blinkered.